Claims that an MI6 officer took part in the abduction and torture of 28 Pakistani terror suspects in Greece must be investigated, Lib Dems say.
Sir Menzies said an inquiry was needed for public confidence
Foreign affairs spokesman Sir Menzies Campbell called for an intelligence and security committee (ISC) inquiry.
A Greek newspaper has published the names of 15 Greek agents and one MI6 operative it says were involved.
Foreign Secretary Jack Straw has told MPs that claims of UK involvement are "complete nonsense".
The Pakistanis claim they were seized in Greece after the 7 July bombings in London.
One said he had had a gun placed in his mouth, while another said he had been beaten up, a BBC correspondent said.
Sir Menzies told BBC Radio 4's Today programme: "I believe the appropriate course now would be for the intelligence and security committee of Parliament to investigate these matters.
"I think it is necessary for public confidence and also to get to the bottom of what are serious allegations for some further investigation to be carried out."
The ISC, chaired by former Northern Ireland Secretary Paul Murphy, is made up of senior members of both Houses of Parliament and has the job of overseeing the work of MI5, MI6 and GCHQ.
Unlike other parliamentary committees, it holds its hearings behind closed doors and makes its reports to the prime minister rather than to MPs.
It has access to top-secret documents and can question intelligence chiefs on their activities.
Sensitive material is blacked out of all ISC reports before their publication, to avoid compromising security operations.
Sir Menzies said: "I think Parliament has a responsibility in these matters, as conferred to it by the legislation which established the ISC when John Major was Prime Minister."
Alekos Alavanos, the leader of Greece's opposition Coalition of the Left party, said of the UK government: "They have to say if British services were involved in this act, that is against the democratic traditions of Europe, against the laws of human rights of the European Union, against the laws on torture of the UN, against the constitutions of every democratic country in Europe."
The suspects, all migrant workers, were reportedly questioned over mobile phone calls linked to the London suicide bombers and another man in Pakistan wanted for questioning about the attacks.
The detainees said they were convinced their interrogators were British, though they spoke fluent Greek. One was described as black.
Sir Menzies said: "I don't for a moment doubt the good faith of the foreign secretary.
"But some of the allegations have become more specific since then, and I think it is necessary that there should be a response from the United Kingdom."
The government has issued a D-Notice preventing the British press from publishing the name of the alleged MI6 officer named in the Greek media.
A Foreign Office spokeswoman said there was no need to revise the foreign secretary's comments last week that no UK officials had "taken part in any alleged mistreatment in Greece of any suspects whatsoever and were not involved in the arrest or detention of those particular suspects".
She also dismissed suggestions that the foreign secretary might have been "mis-advised" by British officials in Athens about the abuse allegations.