Volkswagen has admitted that 11 million vehicles worldwide are fitted with software to cheat emissions tests and taken a 6.5 billion euro (£4.7 billion) profit hit to deal with the growing scandal.
The German car maker is facing deepening scrutiny after being forced to admit it cheated on the tests for nearly 500,000 vehicles.
The Environmental Protection Agency (EPA) in the US said cars had been fitted with sophisticated software to switch engines to a cleaner mode when they are undergoing official emissions testing.
This is a type of software known as a "defeat device". Once on the road, the cars produced nitrogen oxide pollutants at up to 40 times the legal standard.
Volkswagen now faces the cost of recalling millions of vehicles as well as a fine of up to 18 billion US dollars (£11.6 billion) in the US.
Authorities across the world have launched further probes and UK Transport Secretary Patrick McLoughlin called on the European authorities to investigate the matter immediately.
Mr Loughlin said: "We are closely monitoring the situation and have been pushing for action at a European level for more accurate tests that reflect driving on the road.
"It's vital that the public has confidence in vehicle emissions tests and I am calling for the European Commission to investigate this issue as a matter of urgency."
German chancellor Angela Merkel demanded "full transparency" from the company, adding that she hopes "the facts will be put on the table as quickly as possible".
An inquiry is under way in South Korea covering the Golf, Jetta, Beetle and Audi A3 models.
There are calls by France for a Europe-wide investigation into VW as well as French car makers' practices. The European Commission has contacted VW and the US authorities over the findings.