British intelligence believes the capture and rendition of two top Libyan rebel commanders, carried out with the involvement of MI6, strengthened al-Qaida and helped groups attacking British forces in Iraq, secret documents reveal.

The papers, discovered in the British ambassador's abandoned residence in Tripoli, raise new and damaging questions over Britain's role in the seizure and torture of key opponents of Muammar Gaddafi's regime.

Britain is already facing legal actions over its involvement in the plot to seize Abdul Hakim Belhaj, leader of the Libyan Islamic Fighting Group (LIFG) who is now the military commander in Tripoli, and his deputy, Sami al-Saadi. Both men say they were tortured and jailed after being handed over to Gaddafi.

The documents reveal that British intelligence believe the pair's rendition boosted al-Qaida by removing more moderate elements from the insurgency's leadership. This allowed extremists to push "a relatively close-knit group" focused on overthrowing Gaddafi into joining the pan-Islamist terror network.

One document, headed "UK/Libya eyes only - Secret", showed the security services had monitored LIFG members since their arrival in Britain following a failed attempt to kill Gaddafi in 1996, and understood their aim was the replacement of his regime with an Islamic state.

The briefing paper, prepared by the security service for a four-day MI5 visit in February 2005, said that following the seizure of its two key leaders the year before the group had been cast into a state of disarray.

"The extremists are now in the ascendancy," the paper said, and they were "pushing the group towards a more pan-Islamic agenda inspired by AQ [al-Qaida]".

Their "broadened" goals, it continued, were now also the destabilisation of Arab governments that were not following sharia law and the liberation of Muslim territories occupied by the west.

The 58-page document, which included names, photographs and detailed biographies of a dozen alleged LIFG members in the UK, went on to highlight "conclusions of concern" in the light of these changes.

These included the sending of money and false documents to a contact in Iran to help smuggle fighters into Iraq, where British and US forces were coming under fierce attack. "UK members have long enjoyed a reputation as the best suppliers of false documents in the worldwide extremist community," said the report. It added that British LIFG members were becoming "increasingly ambitious" at fundraising through fast-food restaurants, fraud, property and car dealing, and raised nearly all the money for the group outside of Libya.British security also asked Gaddafi's security forces for access to detainees and their debriefs.

Asked about the document, a Foreign Office spokesman said: "It is the government's longstanding policy not to comment on intelligence matters."

The LIFG eventually merged with al-Qaida in 2007. However, a second document, a secret update on Libyan extremist networks in the UK from August 2008, says the response of British members was "subdued and mixed".

It concluded that those already supporting the wider aims of al-Qaida continued to do so, but "those with reservations retain their focus on Libya". It added, however, that some money raised by members in Manchester may have gone to "assist operational activity".

The cache of confidential documents - which included private letters to Gaddafi from Tony Blair, Gordon Brown and key Downing Street aides - was abandoned when the three-story residence was attacked by Gaddafi loyalists in April. .

There was also a dossier prepared by British intelligence with suggested questions for the captured men. The 39-page document, entitled Briefs for Detainees and labelled "UK Secret" on each page, was written in three sections in March, June and October 2004.

The first section is dated the month of Belhaj's arrest, and sought answers on everything from his private life to his military training, activities in Afghanistan and links to al-Qaida. There were also personalised questions for Saadi.

The LIFG, founded by veterans of the mujahideen's war against the Soviet invasion of Afghanistan, was for many years the most serious internal threat to Gaddafi, coming close to blowing up the dictator with a car bomb in his home town of Sirte in 1996. The government denied claims by David Shayler, the renegade British spy, that this assassination attempt was funded by British intelligence.

After Gaddafi's clampdown on the group, dozens of dissidents were allowed to settle in Britain. London only designated the LIFG a terrorist organisation after Libya said it was abandoning its weapons of mass destruction programme in 2003. The move is understood to have been agreed as part of the negotiations with Gaddafi's regime that paved the way to the controversial Blair deal.

Belhaj, now a key figure in liberated Libya, is preparing to sue Britain after other documents discovered in the wake of Gaddafi's fall indicated that MI6 assisted in his rendition to torture and brutal treatment from the CIA and Gaddafi's regime.

MI6 informed the CIA of his whereabouts after his associates told British diplomats in Malaysia he wanted to claim asylum in Britain.

He was allowed to board a flight to London, then abducted when his aircraft landed at Bangkok.

Belhaj claims he was suspended from a ceiling and tortured at Bangkok airport before spending six years in solitary confinement at Tripoli's notorious Abu Selim jail. He also alleges that he was questioned by three British agents, one a woman, who ignored his complaints about mistreatment, and that his pregnant wife was also beaten.

Belhaj has claimed repeatedly that his sole motivation was the overthrow of the Gaddafi regime and that he had no interest in the goals or activities of al-Qaida.

David Mepham, UK director of Human Rights Watch, said: "It is extraordinary and shameful that Britain should have supported the rendition of individuals back to Libya, given that human rights abuses under Gaddafi were so egregious, widespread and well-documented."