The justice secretary Jack Straw has been forced to open an urgent inquiry into how potentially hundreds of criminals were allowed to walk free.
It has emerged Leeds magistrates court failed to issue warrants for the arrest of suspects failing to show up for trial.
Many suspects, including those facing trial for sexual offences, had their cases simply written off as a result.
Mr Straw has taken the chief inspector of courts administration to conduct an inquiry, in consultation with the crown prosecution service (CPA).
In a written statement, the justice secretary said: "The investigations will verify the number of cases involved, the breakdown of offences and the position regarding the police national computer.
"We have started investigating the national process and practice for withdrawing warrants, involving courts, the police and the CPS.
"This has identified differing practices across magistrates courts which will require further local investigation and may require us to clarify the procedures. The issue over the withdrawal of warrants, which was reported to ministers last week, is of particular concern."
The error only emerged after a nationwide review of the "effectiveness of processes" of cases dealt with by UK magistrates courts.
The Conservatives have asked why the government has only just revealed the "critical failing" and are demanding to know when ministers were first aware of the problem.
Shadow justice secretary Nick Herbert said: "Not only is this a critical failing in the criminal justice system which may have put the public at risk, it appears that the government only released information about it and set up an inquiry after the press
became aware of the problem yesterday."
He claimed hundreds of serious offenders may have evaded justice and gone on to re-offend.
Mr Herbert added: "Following on from the loss of HMRC data and the Home Office's failure earlier this year to record overseas convictions, this is yet more catastrophic mismanagement under a government of serial blundering."
The Liberal Democrats blasted the scale of mismanagement as "astonishing" but indicative of the deficiencies in the criminal justice system.
Lib Dem justice spokesman David Heath said: "The lord chancellor must now not only deal with this problem a matter of urgency, but also order a review of court systems across the country to ensure that there is no repetition of this ineptitude.
"The failure to ensure that police national computer records were complete or up to date shows yet again the vulnerability of large databases if those who have access to them are incompetent, careless or venal."