Major revelations on the recording of conversations in garda stations have been notified to the Government.
Some of the incidents will have serious consequences for court cases.
The Cabinet discussed the revelations at its meeting today, and Taoiseach Enda Kenny then met with the Opposition leaders to discuss the issue.
The Taoiseach was informed of the new revelations about garda conduct at the weekend.
Ministers were briefed about the revelations at the Cabinet meeting, where Garda Commissioner Martin Callinan's resignation was also discussed.
A Coalition source said the new developments are extremely serious and more significant even than the whistleblower controversies.
Now the Government has confirmed an inquiry into "a new and very serious issue relating to An Garda Síochána".
"The implications of this matter are potentially of such gravity that the Government has decided to set up a statutory Commission of Investigation into this matter of significant public concern," a spokesman said.
"It will be chaired by a senior serving or retired member of the Judiciary.
"In the context of ongoing legal proceedings in a particular case, the Government has learned that a system was in place in a large number of Garda stations whereby incoming and outgoing telephone calls were taped and recorded. The Government was informed of this new information at its meeting today.
"As the matter is before the Courts, it is not appropriate to make any further comment on the specific case.
"From the information available, the practice of making recordings was in place for many years and was discontinued in November of 2013. It is not yet clear why this practice was in operation.
"The Government is extremely concerned about this information.
"The Government has asked for a full, detailed report on all aspects of this matter from An Garda Síochána and the Department of Justice and Equality, so that an informed decision can be made on the legal and other consequences, with the assistance of the Attorney General.
"The terms of reference for the Commission of Investigation will be decided shortly, once a full report on the circumstances has been made available to the Government.
"The Government also decided to agree to the retirement of Mr Martin Callinan from the position of Commissioner of An Garda Síochána," it added.
The allegations of widespread recording of conversations - in and out of garda stations - go back several years.