James Murdoch was told in 2008 about an email that showed phone hacking at the now-defunct News of the World tabloid was more widespread than his company claimed, the paper's former lawyer said.
The claim heaped fresh pressure on the 38-year-old, the son of Rupert Murdoch and chairman of the British newspaper subsidiary that published the tabloid, after he denied at a parliamentary hearing in July any knowledge of the email.
James Murdoch is increasingly becoming the focus of the phone-hacking scandal which prompted the closure in July of the 168-year-old tabloid and has rocked his family's News Corp. empire.
Tom Crone, former legal manager of the News of the World, said Tuesday that he informed Murdoch about the email in a 15-minute meeting in 2008, when they discussed a lawsuit brought against the paper alleging phone hacking.
"It was clear evidence that phone hacking was taking place beyond Clive Goodman," Crone told parliament's media committee, referring to the paper's former royal editor jailed in 2007 for illegally accessing phone voicemails.
"It was the reason we had to settle the case and in order to settle the case, we had to explain the case to Mr Murdoch and get his authority to settle, so clearly it was discussed.
"I can't remember the conversation and there isn't a note of it. The conversation lasted about 15 minutes. It was discussed, but exactly what was said I can't remember."
The News of the World, published by News International, long maintained that hacking was limited to Goodman and a private detective, who was also jailed in 2007.
But the email, entitled "for Neville" and containing hacked information about Professional Footballers' Association chief executive Gordon Taylor, is widely thought to implicate the paper's chief reporter Neville Thurlbeck in malpractice.
Colin Myler, who was News of the World editor until its closure, confirmed to the committee that he and Crone went to see James Murdoch, then chief executive of News International, and discussed the email, sent in April 2008.
The meeting was aimed at settling the case brought by Taylor, who was suing the paper over phone hacking. Murdoch subsequently authorised a settlement of £425,000 (480,000 euros, $680,000) for the football chief.
Despite insistent questioning from lawmakers, Crone and Myler were unable to give more details about the meeting, claiming they could not remember exactly what had happened.
Following Tuesday's proceedings, Murdoch insisted he stood by his testimony to the committee that he did not know about the email.
"My recollection of the meeting regarding the Gordon Taylor settlement is absolutely clear and consistent. I stand by my testimony, which is an accurate account of events," he said in a statement issued by News International.
News International also accused Crone and Myler of providing "unclear and contradictory" evidence to the committee.
According to parliamentary sources, James Murdoch is due to be asked to give further evidence before the committee next month, the Guardian newspaper reported Wednesday.
An official decision will be taken next Tuesday on whether to recall Murdoch to be grilled over the accusations of Crone and Myler, which they first made in a statement released after the News International chairman gave evidence.
The phone-hacking scandal escalated into a full-blown crisis earlier this year when claims emerged that a private investigator working for the paper hacked into the phone of a murdered teenager.
The controversy has prompted the resignation of two of Murdoch's most trusted executives and even dragged in Prime Minister David Cameron, whose former media chief, Andy Coulson, was arrested over the scandal in July.
Following the original police investigation of 2006, evidence lay untouched for several years but the phone-hacking probe was reopened in January this year amid a slew of new allegations, and several arrests have been made.