Britain said eavesdropping by its GCHQ security agency was legal and no threat to privacy but would not confirm or deny reports it received data from a secret U.S. intelligence programme.
British and U.S. newspapers have suggested that the U.S. National Security Agency handed over information on Britons gathered under the PRISM programme.
In his first remarks on the subject, Foreign Secretary William Hague said the two countries did share intelligence but that GCHQ's work was governed by a very strong legal framework.
"The idea that in GCHQ people are sitting around working out how to circumvent a UK law with another agency in another country is fanciful," Hague told BBC TV on Sunday.
"It is nonsense".
Promising he would give a statement on the subject to the lower house of Britain's parliament on Monday, Hague said there was no threat to privacy or people's civil liberties.
He said was limited in what he could disclose.
"Of course we share a lot of information with the United States," he said, adding that the two countries enjoyed "an exceptional intelligence sharing relationship".
"But if information arrives in the UK from the U.S. it's governed by our laws."
'Snoopers' charter by the back door'
Britain's two-party coalition government is under pressure to reveal more details of how Britain and the United States share intelligence after the reports, based on a leak, suggested such cooperation ran much deeper than was previously known.
Critics said the collaboration amounted to a "snoopers' charter by the back door", accusing the security services of having much greater access to Britons' phone and electronic communications than allowed under British law thanks to the clandestine U.S. programme.
But Hague said such fears were misplaced.
"Intelligence gathering in this country, by the UK, is governed by a very strong legal framework so that we get the balance right between the liberties and privacy of people and the security of the country."
Any intelligence gathering was "authorized, necessary, proportionate and targeted," he added, saying he personally authorised GCHQ intercepts "most days of the week".
There is public debate in Britain about giving the security services more powers to eavesdrop after a British soldier was brutally killed in London last month in an incident the government described as a "terrorist" attack.
Douglas Alexander, the opposition Labour party's spokesman for foreign affairs, welcomed Hague's promise to address parliament on the subject, but said he needed to be more open.
"I will be asking the Foreign Secretary in the House of Commons tomorrow to clarify the role of his Department in overseeing those legal frameworks," Alexander said in a statement.
'You'll never be aware of all the things those [intelligence] agencies are doing to stop your identity being stolen or to stop a terrorist blowing you up tomorrow.' —British Foreign Secretary William Hague
"It is vital that the Government now reassures people who are rightly concerned about these reports."
Britain's parliamentary intelligence and security committee has demanded a report from GCHQ on the subject. By coincidence, its members are due in Washington on Monday to conduct talks with lawmakers and officials in the U.S. intelligence community.
Hague said most Britons had nothing to fear.
"If you are a law-abiding citizen of this country ... you'll never be aware of all the things those [intelligence] agencies are doing to stop your identity being stolen or to stop a terrorist blowing you up tomorrow," he said.
"But if you are a would-be terrorist or the centre of a criminal network or a foreign intelligence agency trying to spy on Britain you should be worried because that is what we work on and we are on the whole quite good at it."
Reports about the apparent sophistication and long reach of U.S. surveillance have also caused anxiety in continental Europe, particularly in Germany, where there are memories of the former East Germany's Stasi intelligence service.
The country's data commissioner has said he expects the government to put a stop to any American surveillance of German citizens, while worried lawmakers from across the political spectrum have said they want to know more.
"No one has a problem with the USA keeping terrorists under surveillance - that has prevented terrorist attacks in Germany before now too," said Thomas Oppermann, a senior lawmaker from the opposition Social Democrats (SPD).
"(But) total surveillance of all citizens by the USA is completely inappropriate. The German government must protect the privacy of Germans from the USA too."
President Barack Obama is due to visit Germany later this month and both the SPD and the opposition Greens have urged Chancellor Angela Merkel to raise the issue with him.
"This affair looks like it will be one of the biggest scandals in data sharing ... Merkel cannot just look away and act like nothing has happened," Renate Kuenast, a senior Green lawmaker, told Reuters.
In Switzerland, at least one lawmaker has demanded that Internet giant Google be forced to be more transparent about the user data it retains.
In neighbouring France, reaction has been more muted so far though rights groups have criticised the French authorities in the past over their ability to filter, censor and block some websites without a court's approval.
The French authorities are themselves preparing to roll out an electronic data gathering system to help investigators.