Official UK migration figures are "little better than a best guess", an influential group of MPs has said.
The Public Administration Committee said the statistics were "not fit for purpose" and did not accurately assess how many non-UK residents were entering and leaving the country.
The MPs recommended finding new ways to gather migration information.
But immigration minister Mark Harper defended the statistics as "accurate" and "very robust".
Labour said the home secretary needed to look at how to measure immigration more accurately "as a matter of urgency".
In the year to June 2012, immigration was estimated at 515,000 while emigration was estimated at 352,000, putting net migration - the difference between the number of people entering and leaving the country - at 163,000.
The Conservatives want to reduce the net migration figure from non-EU countries to under 100,000 a year by 2015.
But the MPs warned that current net migration statistics produced by the Office for National Statistics (ONS) and the Home Office were "blunt instruments" and were "not adequate for understanding the scale and complexity of modern migration flows".
In particular, the MPs criticised the main source for producing migration figures - the International Passenger Survey (IPS).
It was designed in the early 1960s to examine tourism trends and is based on "random interviews" with travellers both arriving and departing at ports and airports.
The Office for National Statistics takes the raw IPS data and adds information about asylum seekers and migration statistics from Northern Ireland, as well as figures for people who have entered the country on short-term visas and decided to ask to extend their stay, before arriving at a final immigration figure.
The Public Administration Committee said just 5,000 migrants a year were identified through the survey and it had a "large margin of error".
It said the migration estimates based on the IPS were "too uncertain" to accurately measure progress against the government's net migration target.
And the IPS failed to gather the type of information needed to work out the social and economic consequences of migration, such as demand for the NHS or schools, the MPs said.
Committee chairman Bernard Jenkin said: "Most people would be utterly astonished to learn that there is no attempt to count people as they enter or leave the UK.
"As an island nation, with professional statisticians and effective border controls, we could gain decent estimates of who exactly is coming into this country, where they come from, and why they are coming here.
"As it is, the top line numbers for the government's 100,000 net migration target are little better than a best guess - and could be out by tens of thousands."
The committee said migration figures could be considerably improved if the Home Office and ONS properly recorded and linked the data they already gathered.
It also called for the e-borders system - which once operational is expected to collect details from passenger lists of all people entering and leaving the UK - to be implemented as quickly as possible.
'A bit dodgy'
Alp Mehmet from Migration Watch, which campaigns for tighter controls of immigration, backed the committee's findings, saying the current way of counting migration was not precise enough.
He told BBC News: "We need to have more interviews overseas. We need to have immigration officers on embarkation controls. We need to bring back common sense into the whole immigration system rather than relying on sample numbers that are no good to man nor beast."
But Mark Harper, the immigration minister, urged people to trust the ONS's methods.
"They're the experts in collecting data," he told BBC Radio 4's World This Weekend. "We know that we're issuing fewer visas for people coming to the United Kingdom....
"We're also getting the right people coming here. So we've reduced overall net migration by a third, but we've actually increased the number of skilled workers coming here."
The government had "rooted out the students who are bogus", he added.
Shadow immigration minister Chris Bryant said the government's figures were "a bit dodgy".
"What they should be doing is having a system of counting people in and out," the Labour MP said, adding that it would be an "own goal" if more British people were leaving the country, students were not coming to UK universities or if the NHS was unable to recruit from abroad.
'Stupid and offensive'
Meanwhile, Business Secretary Vince Cable sought to distance the Liberal Democrats from their coalition partners, saying the target to reduce net migration was "misleading" because it included students, who were just visiting and were "good for the country".
He told the BBC's Andrew Marr Show: "We're not a totalitarian state. We don't count every single person.
"The point about those numbers is it only really matters if you're pursuing some target.
"There's this net immigration figure, which the Conservatives are very preoccupied with, but it's not a government objective."
He also said a government pilot scheme to target illegal immigrants, which involved a van driving around six London boroughs carrying a billboard telling illegal immigrants to "go home or face arrest", was "stupid and offensive".
"It is designed, apparently, to create a sense of fear in the British population that we have a vast problem of illegal immigration," he said.
"We have a problem but it is not a vast one and it's got to be dealt with in a measured way, dealing with the underlying causes."
Mr Cable said he and other Liberal Democrats in government had not been consulted on the scheme and it was "very unlikely" it would continue.
Shadow justice secretary Sadiq Khan said the billboard was a Conservative "attempt to try and win over UKIP voters".