David Cameron admitted today he discussed News Corporation's takeover bid for BSkyB with James Murdoch while the Government was deciding whether to approve it.
The Prime Minister acknowledged his embarrassment at attending a party thrown in Oxfordshire by then News International chief executive Rebekah Brooks - where the conversation took place - and hinted that he regretted doing so in retrospect.
But he insisted there had been no "grand deal" with Rupert Murdoch's media empire to wave through the takeover in return for support from News International newspapers.
"It would be absolutely wrong for there to be any sort of deal and there wasn't," he said. "There was no grand deal."
The Prime Minister admitted discussing BSkyB with senior News Corp executive James Murdoch at a Christmas 2010 dinner at the Oxfordshire home of Mrs Brooks.
Asked whether he was embarrassed that he was even at the party, Mr Cameron said: "Clearly, after all that's been written and said about it, yes of course one might do things differently."
The Prime Minister said he did not recall the exact details of his conversation with Mr Murdoch but that it concerned the recent controversy over Business Secretary Vince Cable's comments that he had "declared war" on News Corporation.
"What I recall saying, although I can't remember every detail of the conversation, is saying something like: clearly that was unacceptable, it was embarrassing for the Government, and to be clear from now on this whole issue would be dealt with impartially, properly, in the correct way, but obviously I had nothing to do with it, I recused myself from it," he told BBC1's Andrew Marr Show.
The Prime Minister offered qualified support for his under-fire Culture Secretary Jeremy Hunt, who is MP for Surrey South West and facing calls for his resignation over his handling of the BSkyB deal.
"As things stand, I don't believe Jeremy Hunt broke the ministerial code," Mr Cameron said, but added that he could yet order an independent investigation after the Culture Secretary has given evidence to the Leveson Inquiry.
He has been resisting demands to call in his independent adviser on ministerial interests, Sir Alex Allan, arguing that the issue should be left to Lord Justice Leveson.
"If evidence comes out through this exhaustive inquiry where you're giving evidence under oath - if he did breach the ministerial code - than clearly that's a different issue and I would act," he said.
The Prime Minister said Mr Hunt's special adviser Adam Smith had been right to resign over his contacts with News Corporation lobbyist Frederic Michel, which were "too close, too frequent".
But he added: "I don't think it would be right in every circumstance if a special adviser gets something wrong to automatically sack the minister."
Labour accused Mr Hunt of having misled Parliament when he told the Commons last year he was releasing "all the documents relating to all the meetings, all the consultation documents, all the submissions we received, all the exchanges between my department and News Corporation".
Last week a raft of emails between Rupert Murdoch's company and Mr Hunt's office came to light for the first time - exposing the Culture Secretary to damaging allegations that he supported News Corporation's bid when he was supposed to be impartial.
The Prime Minister admitted today that he courted Mr Murdoch's newspapers in opposition, but said it was "no great mystery" as he had tried to win over many media outlets.
"I did want the support of as many newspapers and television commentators for the Conservative Party (as possible) because I wanted to take the country in a different direction.
"When it comes to the Murdoch newspapers, I was trying to convince a set of newspapers with largely centre-right, conservative views anyway, that they would be better off with the Conservative Party running the country.
"There is no great mystery here - that is what I was trying to do."
Mr Hunt is now facing a lengthy wait to defend himself at the Leveson Inquiry after his request for an early appearance was rebuffed.
Lord Justice Leveson has refused to bring forward his appearance so that he can answer allegations about his conduct.
A date has still not been set, but politicians will not be called until mid-May, meaning the Culture Secretary will have to wait at least a fortnight and possibly much longer.
Labour's deputy leader and shadow culture secretary Harriet Harman said it was "already evident that Jeremy Hunt has breached the ministerial code".
"Not only has he breached the ministerial code in many, many ways, but even more seriously than that when he was responsible for acting quasi-judicially on a hugely important takeover bid of £8 billion he did not act impartially.
"I just think it says everything about David Cameron that he is refusing to refer him to Sir Alex Allan, to investigate all these breaches of the ministerial code."
Ms Harman also suggested that Rupert Murdoch should be stripped of his broadcasting licence in the UK.
Asked on BBC1's Sunday Politics whether Mr Murdoch was a "fit and proper" person worthy of a licence, she said: "I would say that should be examined independently and if I was examining it independently of course I would say 'no'.
"If the fit and proper person test was to be applied and you ask what has gone on in this organisation, yes, I think he's not a fit and proper person because of what went on in his organisation - widespread criminality.