David Cameron insisted he had seen no evidence that Culture Secretary Jeremy Hunt has breached the ministerial code of conduct in his handling of News Corp's bid for BSkyB.
In an emergency Commons statement, the Prime Minister said he was not going to set up a "parallel inquiry" into Lord Justice Leveson's inquiry into media standards.
But he said that if evidence of a breach of the code emerged when Mr Hunt appeared before the Leveson Inquiry, he would refer the matter to his independent adviser on ministerial interests, Sir Alex Allan, or take action himself.
Mr Cameron was forced to go to the Commons to face MPs' questions after Commons Speaker John Bercow awarded Labour an urgent question. He strongly defended the way Mr Hunt had handled the takeover bid for BSkyB by Rupert Murdoch's News Corp empire. He said that at every stage of the bid, Mr Hunt had sought independent advice, even though he was not required to do so.
Mr Cameron said: "He acted fairly and impartially and in line with the advice of his permanent secretary. I have seen no evidence to suggest that, in handling this issue, the Secretary of State acted at any stage in a way that was contrary to the ministerial code."
Mr Cameron said he had consulted Cabinet Secretary Sir Jeremy Heywood and decided it was right to allow Lord Justice Leveson to conduct his inquiry and not to set a "parallel process" to establish the facts.
He said: "What we have is a judge-led inquiry, witnesses required to give evidence on oath, full access to papers and records, cross-examination by barristers, all live on television. There is nothing this tough or this rigorous the Civil Service or the independent adviser could provide."
Mr Cameron said that he would not wait until the end of the Leveson Inquiry to take action if action was needed. He said: "If new evidence emerges from the Leveson Inquiry that the ministerial code has been broken I will either seek advice from Sir Alex Allan or take action directly."
Mr Cameron went on: "Like other party leaders in our country for decades I have tried to convince media outlets to support the policies of my party and now my Government. But let me be clear, there was not and never has been any grand bargain between the Conservative Party and Rupert and James Murdoch.
"Indeed, look for one moment at the number of meetings that Tony Blair and Gordon Brown had with Rupert Murdoch when they were prime minister."