UK troops have used white phosphorus in Iraq - but only to create smokescreens, Defence Secretary John Reid has said.
Falluja suffered great damage during the offensive
MPs are worried by the admission by US forces that they used the controversial substance in the Iraqi city of Falluja - something they had previously denied.
White phosphorus can burn flesh and some MPs say its use will hand a propaganda victory to Iraqi insurgents.
Both the US and UK Governments deny using the weapon against civilians but there are calls for a UN inquiry.
White phosphorus is highly flammable and ignites on contact with oxygen. If the substance hits someone's body, it will burn until deprived of oxygen.
The US State Department originally denied it had been used in last year's assault on Falluja, a stronghold for Sunni insurgents west of Baghdad.
But on Tuesday, Pentagon spokesman Lt Col Barry Venable said the substance had been used as an "incendiary weapon against enemy combatants".
Spontaneously flammable chemical used for battlefield illumination
Contact with particles causes burning of skin and flesh
Use of incendiary weapons prohibited for attacking civilians (Protocol III of Convention on Certain Conventional Weapons)
Protocol III not signed by US
Col Venable also said white phosphorus was not a banned chemical weapon.
An Italian documentary team has claimed it was used against civilians - but this is strongly denied by the US.
Critics say Falluja was a "civil society" so civilians could have been affected even if not directly targeted.
Downing Street also stressed that insurgents in Falluja had been offered talks before last year's attack on the city.
White phosphorus is part of the arsenal available to British troops - essentially for illumination and smoke.
The defence secretary said he could not answer for the US use of the substance.
But he said: "We do not use white phosphorus, or indeed any other form of munition or weaponry, against civilians...
"We do not use it for anything other than a smokescreen to protect our troops when in action."
But former Defence Minister Doug Henderson said the UK should try to find an alternative.
The substance could burn when it fell from the sky even when it was used to create smoke, he said.
Fellow anti-war Labour MP Alan Simpson told BBC News there was hypocrisy over the issue as Tony Blair had sent troops to war over Iraq's alleged chemical weapons.
"What we are forced to address is that in a post-war occupation of Iraq, the coalition forces - British and American - have also used chemical weapons."
Mike Gapes, the Labour chairman of the Commons foreign affairs select committee, said white phosphorus was defined as an "incendiary", not a chemical weapon.
He suggested treaties on chemical weapons should be strengthened so they covered the substance.
Mr Gapes said the way the Americans had mishandled the issue by initially denying using white phosphorus was a "public relations disaster for them".
Liberal Democrat foreign affairs spokesman Sir Menzies Campbell said the denial would convince sceptics there was something to hide.
"A vital part of the effort in Iraq is to win the battle for hearts and minds," said Sir Menzies.
"The use of this weapon may technically have been legal, but its effects are such that it will hand a propaganda victory to the insurgency."
Lib Dem MEPs' leader Graham Watson is calling for a United Nations inquiry into the extent to which white phosphorus has been used.
Conservative shadow foreign secretary Liam Fox said there needed to be more openness from the Pentagon.
But he added: "Although white phosphorus is a brutal weapon, we need to remember that we were talking about some pretty brutal insurgents."