Britain's enemies are "rubbing their hands with glee" over whistleblower Edward Snowden's NSA leaks, the MI6 chief said.
GCHQ have launched an online code breaking competition to find people capable of joining the Government's national cyber security teams.
The Foreign Secretary said British intelligence would never use its partnership with the United States to get around UK laws.
Communications giant Vodafone said they would contact the Government over reports that British spies have access to hundreds of millions of text messages and added they were "shocked and surprised" by the allegations.
What you're describing sounds concerning to us because the regime that we are required to comply with is very clear and we will only disclose information to governments where we are legally compelled to do so, won't go beyond the law and comply with due process.
But what you're describing is something that sounds as if that's been circumvented.
– Stephen Deadman, group privacy officer at Vodafone Group, told Channel 4 News
And for us as a business this is anathema because our whole business is founded on protecting privacy as a fundamental imperative.
We're going to be contacting the Government and are going to be challenging them on this. From our perspective, the law is there to protect our customers and it doesn't sound as if that is what is necessarily happening.
Hundreds of millions of text messages which have been scooped up in a secret operation can be viewed by British spies, according to the latest leak from whistleblower Edward Snowden.
A secret database called Dishfire was created by America's National Security Agency (NSA) which stores messages for future use and British spies - who face tough domestic laws - have been given a back door to exploit that information, it was claimed by Channel 4 News and the Guardian.
Dishfire, a database that collects nearly 200 million texts everyday from around the world, traces people when they take their mobile phone abroad and are sent a welcome message from their phone company.
The texts help the NSA to track people's whereabouts, their contacts, their banking details and their movements if they travelled from country to country, it is claimed.
British spy agencies can only access text message data of specific targets with permission and if they want to see the content of the message they must get a warrant from a secretary of state.
Dishfire collects data on everyone so by accessing the system, British spies can pull off information they wouldn't be entitled to under strict British laws.
Israel's Prime Minister Benjamin Netanyahu has reacted angrily to allegations that the United States spied on Israel's leaders. He said on Monday such activity was unacceptable and had no place in the allies' close relationship.
Documents leaked on Friday by former U.S. National Security Agency contractor Edward Snowden showed the NSA and its British counterpart GCHQ had in 2009 targeted an email address listed as belonging to then-Israeli Prime Minister Ehud Olmert and monitored emails of senior defence officials.
Mr Netanyahu did not elaborate on whether Israel intended to ask Washington for clarifications.
Nick Harvey from aid organisation Doctors of the World, which was allegedly targeted by GCHQ, told ITV News: "We're completely shocked and surprised by these allegations of secret surveillance.
"Our doctors, nurses and midwives are by no stretch of the imagination a threat to national security so we have no idea why they would target an organisation like ourselves."
The latest allegations about the extent of British and US spying are fuelling the debate about surveillance - with reform of the US National Security Agency appearing inevitable.
President Barack Obama told a press conference that "trust had been diminished" and it was important to take that into account when weighting up how the US "structures these programmes."
The revelation that Britain and America had a list of surveillance targets which included the Israeli Prime Minister, a European Union commissioner and various charities, has prompted an angry response.
The European Commission issued a statement saying the claims "deserve our strongest condemnation" if proved true.
"This is not the type of behaviour that we expect from strategic partners, let alone from our own member states," it said.
Unicef and Medecins du Monde were among the organisations listed in the latest batch of secret documents leaked by fugitive Edward Snowden to be published by the Guardian.
Leigh Daynes, an executive director of Medecins du Monde in the UK, told the Guardian he was "shocked and surprised by these appalling allegations of secret surveillance on our humanitarian operations".
Britain and America's intelligence services had a list of surveillance targets that included the office of the Israeli Prime Minister, German government buildings and a top European Union official, according to documents leaked by whistleblower Edward Snowden.
Foreign leaders including African heads of state and their family members, directors of the United Nations, officials overseeing oil and finance ministries all had their communications monitored by Britain and the US, according to the secret documents.
The documents chronicle NSA's and GCHQ's eavesdropping from 2008 to 2011.
The technology used by Britain's intelligence agencies is "out of control", former Liberal Democrat leader Lord Ashdown has warned.
Lord Ashdown, a former special forces soldier and spy, called for an inquiry to address questions of privacy in the digital age.
He said surveillance should be targeted against individuals or groups, not against "the whole nation" as recent operations exposed by whistleblower Edward Snowden were.
But in an interview with The Guardian, which has revealed details of the activities of British eavesdropping agency GCHQ based on documents disclosed by US intelligence whistleblower Mr Snowden, Lord Ashdown defended the right of the state to intercept communications.
Two Conservative MPs have written to the editor of the Guardian to urge him to "acknowledge the devastating assessment" by Britain's spymasters of the damage caused by the publication of leaks by the former US intelligence operative Edward Snowden.
Tories Julian Smith and Stephen Phillips called on Alan Rusbridger to clarify whether he had "acted on every security concern raised by Government" over news stories.
They wrote that Rusbridger "fails to acknowledge the devastating assessment of the damage done to the national security of the United Kingdom by The Guardian's reporting of the Snowden leaks."
Yesterday MI6 chief Sir John Sawers said the Edward Snowden's leaks "have been damaging and put operations at risk."
Working at MI6 is not like James Bond, one of the security chiefs told MPs that operatives are given far more supervision.
"The idea of sending an agent off into the field like James Bond, then he comes back two months later and reports... that doesn't work that way," Sir John Sawers, chief of MI6, said. "Our people in the field will have constant communication with us."