Immigration Minister Mark Harper has said the increase in the number of outstanding immigration and asylum cases raises "legitimate concerns".
In a statement, he said:
This report raises some legitimate concerns but we are taking robust action and it is working.
Every day it gets harder to live illegally in the UK - we are tracking people down and taking action against them.
We are restricting access to benefits, free healthcare and financial products, and businesses can be fined up to £10,000 for every illegal worker they employ.
We are winning more deportation cases in the courts, exceeding visa processing targets and have introduced interviews to test whether foreign students are genuine - all of which are praised in this report.
Keith Vaz, the Commons Home Affairs Select Committee Chairman, has said the backlog of outstanding immigration and asylum cases is "spiralling out of control".
In a statement, he said: "There are now about the same number of cases awaiting resolution by UKBA as there are people living in Iceland. The backlog is spiralling out of control."
MPs in the committee added: "We are concerned that the closure of the controlled archives may result in a significant number of people being granted effective amnesty in the United Kingdom, irrespective of the merits of their case.
"For this reason we are concerned that the final checks made on these cases should be thorough and that they should not be rushed to meet an artificial deadline.
"We are particularly interested to find out whether any such individuals would be offered an amnesty or if they would have to start their asylum or immigration application again."
The Home Affairs Committee completes quarterly inquiries into the work of the UK Border Agency and its latest report, which covers the second quarter of the year from April – June 2012, has looked at the number of backlog cases the agency is dealing with.
The troubled agency had 302,064 cases to investigate, trace or conclude by the end of June - more than 25,000 compared with the end of March, figures showed.
Most of the increase came from a rise of more than 24,000 missing migrants who have been refused permission to stay in the UK but whose whereabouts are unknown, referred to as the migration refusal pool.
The number of outstanding immigration and asylum cases rose by 25,000 in three months and is "spiralling out of control", making the total caseload the equivalent of the population of Iceland, the Commons Home Affairs Select Committee Chairman Keith Vaz has said.
More than 300,000 cases needed to be dealt with at the end of June, up 9% over the previous three months, the Commons Home Affairs Select Committee revealed.
But clearing the backlog should not be a rushed job done without the proper checks, the committee's report on the UK Border Agency (UKBA) warned.