The News of the World has sacked assistant editor Ian Edmondson and handed over new material to Scotland Yard.
The Metropolitan Police announced last night that it was launching a new investigation into allegations of mobile phone voicemail message hacking at the News of The World in 2005 and 2006.
Edmondson was suspended in December after being linked to phone-hacking by documents filed at the High Court by lawyers for actress Sienna Miller in a privacy action against the News of The World.
The latest developments follow former News of the World editor Andy Coulson's decision to resign as Downing Street head of communications last Friday.
Police announced a fresh inquiry into the phone hacking controversy last night after receiving "significant new information".
A police spokesman: "The Met has today received significant new information relating to allegations of phone hacking at the News of The World in 2005/06. As a result, the Met is launching a new investigation to consider this material.
"This work will be carried out by the specialist crime directorate which has been investigating a related phone hacking allegation since September 2010.
"Discussions have taken place with the Director of Public Prosecutions in relation to the recently announced role of Alison Levitt QC.
"It has been agreed that her task will continue and she will evaluate any new evidence and advise as to the progress of the investigation.
"The original phone hacking investigation was undertaken by the counter terrorism command in specialist operations.
"However, in view of their current workload and the continuing 'severe' threat level, it has been agreed that it is no longer appropriate to divert them or Acting Deputy Commissioner John Yates from their main duties and responsibilities.
"Accordingly, this new investigation will be led by Deputy Assistant Commissioner Sue Akers from the specialist crime directorate. We will not be making any further comments at this stage."
Confirming the sacking of Edmondson, News of The World owners News International said in a statement: "Mr Edmondson was suspended in December 2010 following a serious allegation.
"Material evidence found during the course of the subsequent investigation has led to Mr Edmondson's dismissal.
"News International has informed the police, handed over the material it has found and will give its full co-operation going forward.
"News International reiterates that it will take swift and decisive action when we have proof of wrongdoing."
The latest developments come as lawyer Mark Lewis has revealed that he is acting for four people who believe their phone messages were hacked by journalists working for other newspapers - outside News International.
Former Labour MP Paul Marsden has alleged that his mobile phone was hacked by journalists working for the Sunday Mirror in 2003.