Phones owned by relatives of dead UK soldiers were allegedly hacked by the News of the World, a national newspaper reports.
The Daily Telegraph claims the phone numbers of relatives of dead were found in the files of private investigator Glenn Mulcaire.
This comes after Prime Minister David Cameron said he would set up a public inquiry into alleged phone hacking.
Rupert Murdoch, the paper's owner, has called claims of hacking "deplorable".
Speaking after earlier claims of phone hacking, he said: "Recent allegations of phone hacking and making payments to police with respect to the News of the World are deplorable and unacceptable."
In a statement, Mr Murdoch, chairman of News Corporation, News International's parent company, said: "I have made clear that our company must fully and proactively co-operate with the police in all investigations and that is exactly what News International has been doing and will continue to do under Rebekah Brooks's leadership.
'Shocked and appalled'
"We are committed to addressing these issues fully and have taken a number of important steps to prevent them from happening again."
After details of the Telegraph story emerged, a senior source at News International told BBC political editor Nick Robinson: "The military is a cause central to the heart of News International. If this story is correct we are absolutely shocked and appalled that that tradition has been besmirched".
"The News of the World and the Sun have prided themselves on their support for Help the Heroes, campaigns for the military covenant and other military causes."
Meanwhile, Scotland Yard has told George Osborne that his name and home phone number appeared on notes kept by Mulcaire and former News of the World reporter Clive Goodman, a spokesman for the chancellor said.
He said there was no suggestion that his phone had been hacked.
The prime minister has expressed disgust at claims that the voicemail of murdered girl Milly Dowler was hacked, and some messages deleted.