Photos which appeared in the Daily Mirror apparently showing abuse of an Iraqi detainee were "categorically not taken in Iraq", Adam Ingram told MPs.
The MoD says Adam Ingram did not mislead MPs
The defence minister said the truck in the photos had never been in Iraq.
But the Daily Mirror said Mr Ingram had "not produced incontrovertible evidence that the pictures are faked".
The paper's editor said "the pictures accurately illustrated the reality about the appalling conduct of some British troops".
The BBC's Political Editor Andrew Marr said senior officers had claimed the photographs were actually taken at a Territorial Army Barracks in Preston, Lancashire.
He said Mirror editor Piers Morgan told him on Thursday "there were 'two hopes for my resignation - no hope and Bob Hope', which gives you some sense of the crumbling sense of contrition inside Mr Morgan".
The UK's most senior army officer said he was relieved the photographs were not taken in Iraq and could only conclude they were fake.
Sir Mike Jackson, Chief of the General Staff, also said the findings went some way towards "removing a blemish" on the force's reputation and alleviates the increased risk their publication posed to British soldiers currently serving in Iraq.
But Mr Jackson said investigations into allegations of abuse of Iraqis would continue and any soldiers proven to have committed crimes against detainees would be dealt with by due course of law.
Mr Ingram refused to say any more about the Royal Military Police inquiry into the photos because criminal offences may have been committed.
He said he was disturbed that troops were being vilified before facts were established.
He also called on Mr Morgan "to assist fully in this inquiry". The editor claims he has cooperated.
Mr Morgan insists the photos were "just one piece of evidence about one incident" and his paper made "no apology" for highlighting "a much bigger issue".
However, the minister said the publication of the photos had impacted on the morale and safety of British armed forces.
He said troops had been injured by a petrol bomb thrown by children in Iraq, had been attacked by militiamen and a patrol suffered a grenade attack in Basra.
The Military Police's special investigations branch has been investigating the Mirror photos of alleged abuse by soldiers in the Queen's Lancashire Regiment (QLR).
The pictures appeared to show troops urinating on a prisoner and striking him with a rifle.
Brigadier Geoff Sheldon of the QLR said the regiment was "deeply troubled" by the allegations.
"We know it's not true so the feeling is one of disappointment, anger, irritation," he told the BBC.
Mr Ingram told MPs the "very high name of the QLR has been dragged through the
mud by the Mirror" and he understood the anger of the regiment and their families.
"Those pictures were categorically not taken in Iraq," he said.
"I can also tell the House this is not only the opinion of the special investigations' branch investigators - it has been independently corroborated.
"The truck in which the photos were taken was never in Iraq.
"Those involved may have committed criminal offences under military law which are the proper subject of on-going investigations by the RMP."
Tory defence spokesman Keith Simpson said: "Those who connived with the production of those photographs and those who have published them did a great wrong."
He said the "good name and possibly the lives" of British troops "have been traded for what now appear to be cheap news headlines".
Mr Ingram defended his earlier claims that he had not received adverse reports from the International Committee of the Red Cross or Amnesty International relating to British treatment of Iraqis.
"That does not mean to say I was unaware of the issues and the actions being taken," he said, referring to the Red Cross report.
Mr Ingram said Amnesty had sent him only a one-page letter which did not
amount to a report.
Colin Breed, for the Lib Dems, said: "Why were these reports, which were of obvious political significance, not shown to ministers and not reported to this House?"