About 61,000 asylum claimants are unlikely to be traced by officials trying to clear backlogs, even if they have no right to remain in the UK.
The figure was released by the Commons' Home Affairs Committee, which said the immigration system was "still failing" amid a "rush" to clear backlogs.
And it said the future head of the UK Border Agency (UKBA) should receive a lower salary.
Immigration Minister Damian Green said the immigration system was recovering.
The committee has been asking the UKBA for regular updates on its attempts to clear backlogs of up to 400,000 asylum applications after one former home secretary said that it was not fit for purpose.
In many of the cases, officials had failed to properly conclude asylum applications, leading to settlement or removal of the individual. Others were shelved amid complex legal actions which were then overtaken by other events.
In its latest report on how well the UKBA was now performing, the MPs said that about one in seven cases - about 61,000 - would probably be closed because officials could not trace the individuals after such a long time.
This effectively mean the claimants and their families, if still in the UK, were in limbo - neither legally settled nor under threat of removal.
The committee said that it accepted the agency should not spend "unlimited time" trying to track every missing applicant, but added that some of those allowed to settle probably should not have been given leave to remain.
And it warned that officials also faced a "real danger" of a new backlog forming as they struggled to deal with new cases.
The report also said that the UKBA was unlikely to trace about 70 of the 1013 foreign national prisoners who were released prior to 2005 without being properly considered for deportation.
'Some progress'Keith Vaz MP, chairman of the committee, said: "Much of the delay… stems from poor quality decision-making when the application is initially considered.
"The UK Border Agency has made some progress over the last few years in relation to new procedures and approaches, but is still failing to meet expectations.
"More consistent and rigorous scrutiny of applications would lead to fewer delays, fewer appeals, less uncertainty for the applicant, less pressure on the officials themselves, and probably lower costs for the UK taxpayer."
The committee also said the salary for the head of the UKBA should be slashed. The outgoing head of the agency, Lin Homer, is paid £208,000 a year.
Mr Green said: "We have known for some time that the asylum system was chaotic and has been recovering slowly.
"This government is absolutely committed to ensuring asylum cases are concluded faster, at lower cost, and that we continue to improve the quality of our decision making.
"It is also crucial that the UK Border Agency focuses its resources effectively - which is why it is sensible to target those individuals where our evidence shows they are still in the country."
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