The number of immigrants whose visas have expired and cannot be traced has rocketed to 174,000 in the last six months.
The backlog is now so big that private contractors have been drafted into to resolve the situation at a cost of £30 million, according to the Commons' home affairs committee.
Committee chair Keith Vaz was scathing in his criticism of the UK Border Agency (UKBA).
"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 and stands at a third of a million. It has grown by 25,000 cases in just three months," he said.
The third of a million figure relates to the total number of people in the country that the UKBA has lost track of, not only those who had visas previously.
There are also just under 4,000 foreign criminals who have been released from prison but who have not yet been deported, a number that is likely to increase.
Vaz called for greater scrutiny of the UKBA's practices.
"Entering the world of the UKBA is like falling through the looking glass. The closer we look the more backlogs we find, their existence obscured by opaque names such as the 'Migration Refusal Pool' and the 'Controlled Archive'," he added.
"UKBA must adopt a transparent and robust approach to tackling this problem instead of creating new ways of camouflaging backlogs."
The government's immigration policies have come under scrutiny in recent months as they continue to publicly stick to their pledge of bringing net migration (the total number of people entering the country minus the number leaving) down to under 100,000 a year.
Last year net migration stood at 216,000.