Theresa May, the home secretary, has come under pressure to overhaul regulation of undercover policing after a highly critical parliamentary report that described some of the practices adopted by officers who infiltrated protest groups over a 40-year period as "ghoulish and disrespectful".

The inquiry by the Commons home affairs select committee follows a string of scandals involving undercover police adopting the identities of dead children, and cultivating what it described as "devastating" long-term relationships with political activists before faking their own disappearances.

MPs on committee said there was an "alarming degree of inconsistency" between senior police and ministers over exactly what forms of behaviour were authorised under the rules. The MPs said there was now a compelling case for reviewing the rules for state-sanctioned surveillance and called on ministers to draft fresh legislation for the next parliament.

They said that when it came to undercover officers engaging in sexual activity "there are some lines that police officers must not cross".

A proposed overhaul of legislation was immediately supported by the Association of Chief Police Officers (Acpo), which said it had been calling for greater oversight of undercover operations for the last two years.

Whitehall sources indicated ministers were reluctant to redraft the Regulation of Investigatory Powers Act (Ripa), which governs covert surveillance activities by the state. The Home Office declined to say whether it would review the rules.

Eleven women who say they were deceived into having relationships with undercover police are suing the Met for damages. The committee said the lawsuits have revealed "an unsatisfactory degree of ambiguity" over what covert police agents were authorised to do when infiltrating protest groups.

"In matters which concern the right of the state to intrude so extensively and intimately into the lives of citizens, we believe that the current legal framework is ambiguous to such an extent that it fails adequately to safeguard the fundamental rights of the individuals affected," the MPs said.

The committee also credited the Guardian's investigation into undercover policing, which recently revealed how the Met authorised officers to assume the identities of dead children, without the knowledge or consent of their parents.

"The practice of 'resurrecting' dead children as cover identities for undercover police officers was not only ghoulish and disrespectful, it could potentially have placed bereaved families in real danger of retaliation," the MPs said.

They added that civil servants should begin reviewing the rules now so Ripa could be redrafted after the next general election.

"This will require great care and will take some time. We recommend that the government commit to the publication of a green paper on the regulation of investigatory powers before the end of this parliament."

Keith Vaz MP, who chairs the committee, said: "Ripa is supposed to provide a safeguard against inappropriate intrusion into people's private lives. It has clearly failed to do so in these cases and they signal the need for an urgent review of the law."

He was backed by Jon Murphy, chief constable of Merseyside police, who said that greater accountability was required. Murphy, whose Acpo responsibilities include covert operations, said undercover policing was "lawful, ethical, necessary".

He added: "But it is also one of the most challenging areas of operational policing and can have considerable impact on public confidence. For this reason Acpo has long supported increased oversight of undercover policing and would welcome a review of Ripa."

The Home Office said in a statement that it was crucial that powers under the legislation were used "proportionately", adding: "Ripa already provides strong safeguards but we recognise the system can be improved." Home Office sources said the department "rejected" the suggestion from MPs that the law had failed to protect human rights. Instead, the department believed that police were at fault for not implementing the legislation properly.

Last month, the committee heard private evidence from four women who had long-term relationships with undercover police, including Mark Kennedy, the police spy who was unmasked two years ago.

One of the women had a six-month relationship with Kennedy. Another described how she gave birth to a child fathered by an undercover police officer, Bob Lambert, who later vanished from her life.

A third described her relationship with Mark Jenner, an undercover police officer who posed as a left-wing activist in the late 1990s.

The committee said the devastating impact on the lives of these and other women was beyond doubt. It added: "We do not believe that officers should enter into intimate, physical sexual relationships while using their false identities undercover without clear, prior authorisation, which should only be given in the most exceptional circumstances.

"In particular, it is unacceptable that a child should be brought into the world as a result of such a relationship and this must never be allowed to happen again."

The committee's interim report, which is part of a wider inquiry, follows a succession of revelations about undercover police sleeping with political activists.

Of the 11 undercover police unmasked over the past two years, nine are believed to have slept with people they were spying on. Almost all of these were long-term, meaningful, relationships with female political activists.

The Met has refused to say whether it will contact the parents of children whose identities were adopted by undercover officers. However the MPs said affected families deserved "an explanation and a full and unambiguous apology", and called on officers who sanctioned the policy to be identified and placed under formal investigation.

"It is shocking that the practice of using deceased infants' names was apparently a surprise to [some] senior officers and it is vital that the investigation establish quickly how high up the chain of command this practice was sanctioned," they said.

The MPs also questioned the justification of planting undercover police in groups that only participate in peaceful protest.

"Issues of civil liberties, and the right to peaceful protest, cannot and should not be seen as relatively minor matters which can be set aside lightly," they said.