Prime Minister David Cameron has announced "one inquiry in two parts" that will cover the phone hacking scandal and also encompass the relationship between the police and the media, as well as regulation of the press.
The independent public inquiry will have the power to summon journalists, newspaper executives, police and politicians to give evidence under oath, Prime Minister David Cameron said.
Cameron announced that the inquiry would be led by Lord Justice Leveson who will report to both the Home Secretary and the Secretary of State for Culture, Media and Sport.
Cameron said Leveson will look into general issues including "the culture, practices and ethics of the press", and will recommend a new model of regulation for newspapers.
Leveson's inquiry will also specific allegations of "unlawful or improper conduct at the News of the World and other newspapers, and the way in which management failures may have allowed this to happen".
"We all want the same thing," Cameron said. "Press, police and politicians that serve the public."
Labour leader Ed Miliband said that he broadly welcomed the inquiry, and added the he was glad the government "had followed (Labour's) advice".
Following the statement, Labour MP Tom Watson asked about possible "rogue elements" inside the intelligence services and their dealings with the media. The prime minister responded that the inquiry would follow evidence wherever it leads.
Labour MP Chris Bryant told The Huffington Post that he supported the inquiry, but said it should look closely at the role of private investigators: "They have got to look at the role of private investigators. The newspapers employ them so they'll have liability afterwards."
Martin Moore, director of the Media Standards Trust and one of the founders of the Hacked Off campaign for a judge-led inquiry, cautiously welcomed the announcement: "We're part way there, we're certainly not all of the way there. We just received the terms of reference, we're going through them."
Moore added that the details of the inquiry would determine how successful it would be: "It will be silly to start making judgements now. Details are incredibly important here, (we need to) look at them reflect on that afterwards and see if we have indeed got the results we need."
In parliament Cameron also gave an update on the criminal investigation into phone hacking and payments to police. He said of the operation led by Deputy Assistant Commissioner Sue Akers: "Her team is looking through 11,000 pages containing 3,870 names, including around 4,000 mobile and 5,000 landline phone numbers. They have contacted 170 people so far - and they will contact every single person named in those documents."
On the BSkyB bid Cameron said: "This business should not be focused on mergers and takeovers, but on clearing up the mess and getting their house in order."
Any executives who knew or ordered phone hacking should lose their jobs, Cameron said: "The people involved whether they were directly responsible for the wrongdoing, sanctioned it, or covered it up however high or low they go must not only be brought to justice they must also have no future role in the running of a media company in our country."