It comes hot on the heels of mounting criticism of the British prime minister by the electorate and could damage Tony Blair's reputation further.
Blair's justification for invading Iraq was based on poor quality intelligence that was too easily swallowed by ministers, says Sir Peter Heap.
The former ambassador who worked closely with the country's foreign intelligence service over many years made his attack in a London newspaper published on Thursday.
Heap, ambassador to Brazil between 1992 and 1995, used his article in The Guardian to make an unprecedented attack on Britain's foreign intelligence service known as MI6.
Blair is under pressure and this
latest attack will not help the PM
Heap's assessment of London's Iraq intelligence comes as veteran judge Lord Hutton prepares his report following the inquiry into the apparent suicide of British arms expert David Kelly.
Scientist Kelly was the source of a BBC report that said the government exaggerated its case for the US-led war on Iraq in March, backed by 40,000 British troops.
"The Hutton inquiry seems likely to conclude that no one in government set out to significantly mislead the public over the threat from Iraq," Heap wrote.
"This should put the focus on the real issue: why the government got it so wrong in stating that Iraq was a threat at all,thereby providing the justification for going to war.
"This means a debate about the poor quality of intelligence material that was far too readily accepted at face value by ministers," Heap added.
Kelly's suicide has hurled Blair into the most serious crisis of his six-year tenure as prime minister, causing him to lose waves of support among voters according to recent polls.
Heap meanwhile attacked the working practices of MI6 and called for an overhaul of the organisation.
"Those agents, dependent on that money, inevitably had a strong temptation to embellish their reports"
Sir Peter Heap, senior diplomat
He told The Guardian that during a diplomatic career spanning nearly four decades, he saw MI6 staff bribing unreliable local informants with large sums of cash in return for raw intelligence.
"Those agents, dependent on that money, inevitably had a strong temptation to embellish their reports," Heap said.
"The whole process is wrapped around in an unnecessary cloak and aura of secrecy, mystery and danger that prevents those from outside the security services applying normal and rigorous judgements on what they produce."
Britain's government is under attack over its most sensational claim in a September 2002 dossier on Iraq that Saddam Hussein could deploy chemical or biological weapons in as little as 45 minutes.
The BBC reported in May that the government had "sexed up" the claim. The defence ministry responded by outing Kelly as the source of the report. Days later on July 18, Kelly's body was found with a slit wrist in woodland near his home in central England.
The Hutton inquiry into his suicide heard that the 45-minute claim referred to weapons fired from artillery or mortars, and not missiles that could hit distant lands.
It also heard over 23 days of testimony during August and September that the source of the 45-minute claim was "second-hand".
Hutton is due to publish his findings by the end of November with Defence Secretary Geoff Hoon seen as the likely fall guy over his department's outing of Kelly.
Heap's 36-year career in the diplomatic service also took in spells as high commissioner to the Bahamas and the British trade commissioner in Hong Kong.
He is the most senior diplomat to give such a detailed and scathing public account of MI6's behaviour, normally protected by Britain's Official Secrets Act, The Guardian said.
Heap told the daily that Britain's senior embassy staff see all of MI6's raw intelligence reports filed to London but are powerless to veto them even if their accuracy is doubted.