Cameron said that an inquiry into the conduct of the UK's press could begin before the Parliament breaks up for summer recess, according to a report by the Daily Telegraph.
"This ... inquiry should look at the culture, the practices and the ethics of the British press," Cameron said, according to the Telegraph. "In particular, they should look at how our newspapers are regulated and make recommendations for the future."
Cameron has recommended that the inquiry should be conducted by independent figures from a range of backgrounds who command the public's confidence.
Cameron announced the inquiry in addition to a separate full public inquiry into alleged phone hacking activities at the News of the World (NotW) newspaper.
A private investigator working for the NotW is alleged to have hacked into people's phones. The alleged activity involved listening to voicemail messages left on the phones. It has been alleged that the phones of murdered schoolgirl Milly Dowler and the families of people killed during the terrorist bombings in London have been hacked.
Cameron said the Press Complaints Commission (PCC) had "failed" to regulate the press properly.
Currently the rules governing press behaviour in the UK are set out by editors in a code of practice. The Editors' Code is a set of standards journalists should observe when reporting and includes rules on accuracy, intrusion into grief and privacy and secret recordings.
The PCC can 'name and shame' publications that break the Editors' Code and ask them to publish apologies, but it has no legal powers to enforce punishments such as fines for violations of the Code.
"It's now clear to everyone that the way the press is regulated today is not working," Cameron said, according to the Telegraph's report. "Let’s be honest: the Press Complaints Commission has failed. In this case – in the hacking case – it was, frankly, completely absent."
"Therefore we have to conclude that it is ineffective and lacking in rigour. There is a strong case for saying it is institutionally conflicted, because competing newspapers judge each other. As a result, it lacks public confidence," Cameron said.
Cameron called for a new system of regulation that should "strike the balance" between privacy rights and what newspapers can publish in the public interest.
The PCC said it welcomed the Prime Minister's inquiry announcement but said it should not be held as a scapegoat for misconduct amongst the press. The PCC said it could "play its part" in the reform of press regulations.
"We are confident that such an inquiry will recognise the considerable successes of the Press Complaints Commission," the PCC said in a statement.
"We do not accept that the scandal of phone hacking should claim, as a convenient scalp, the Press Complaints Commission. The work of the PCC, and of a press allowed to have freedom of expression, has been grossly undervalued today," the PCC said.
Earlier today Labour leader Ed Miliband had called for the PCC to be scrapped. He called the organisation a "toothless poodle" that had "failed" to provide the public with trust in how the press is self-regulated.
"We need wholesale reform of our system of regulation," Miliband said in a speech at the Reuters news agency.
"The Press Complaints Commission has failed. It is time to put the PCC out of its misery. We need a new watchdog. There needs to be fundamental change," Miliband said.
Miliband said that a new press watchdog should be set up with increased powers but within a self-regulatory framework. "My instincts continue to be that a form of self-regulation would be the best way forward," he said.
"A new body should have far greater independence of its Board members from those it regulates, proper investigative powers and an ability to enforce corrections," Miliband said.
Miliband said the PCC had not properly investigated alleged phone hacking activities at the NotW.
"[The PCC] failed to get to the bottom of the allegations about what happened at News International in 2009," Miliband said. "Its chair admits she was lied to but could do nothing about it."
"The PCC was established to be a watchdog. But it has been exposed as a toothless poodle. Wherever blame lies for this, the PCC cannot restore trust in self-regulation," Miliband said.
The PCC said Ed Miliband was "wrong" to call for it to be scrapped.
"[Miliband's] remarks are long on rhetoric and short on substance," the PCC said in a statement.
On Wednesday the PCC admitted it needed to restore public confidence in how the press is regulated. It announced that it was to review the Editors' Code, its own funding and constitutional arrangements, its practical independence and the range of sanctions it had available for violations of the Code.
