The Information Commissioner has warned that strict safeguards must be put in place if plans to monitor the calls, emails, texts and website visits of everyone in the UK are implemented.
In an October 2010 report, Christopher Graham's office said the case for retaining such data had yet to be made.
If such a step was taken, they warned in a briefing paper obtained by Tory MP Dominic Raab, strict rules were needed.
The Home Office says the plan is key to tackling crime and terrorism.
Attempts by the last Labour government to create a giant central database containing all UK web and telephone use were dropped after huge opposition, including from the Conservatives and Liberal Democrats.
Instead internet service providers have had to keep details of users' web access, email and internet phone calls for 12 months under an EU directive from 2009.
Although the content of the calls themselves is not kept, the sender, recipient, time of communication and geographical location does have to be recorded.
The proposed new law - which may be announced in the Queen's Speech in May - would reportedly allow GCHQ to access that data in real time, on demand, rather than retrospectively.
Although it is not clear what exactly is being proposed, Downing Street insisted it would not include the content of communications.
Crime Prevention Minister James Brokenshire told the BBC it was not "some great big government snooping exercise", but a change designed to allow police officers to continue to solve crime in an era when communications data - details of phone calls - was used in 95% of all serious crime and terrorism cases.
"We absolutely get the need for appropriate safeguards and for appropriate protections to be be put in place," he added.
Deputy Prime Minister Nick Clegg said he was "totally opposed to the idea of governments reading people's emails at will, or creating a new central government database".
"The point is we are not doing any of that and I wouldn't allow us to do any of that," he said.
"All we are doing is updating the rules which currently apply to mobile telephone calls to allow the police and security services to go after terrorists and serious criminals, and updating that to apply to technology like Skype which is increasingly being used by people who want to make those calls and send those emails."
The Information Commissioner's office briefing paper in October 2010 said: "There needs to be some recognition that this additional data will be a honeypot as it will reveal the browsing habits of celebrities, politicians, etc."
It suggested that a new offence, possibly attracting a custodial sentence, could be created to punish any wrongful disclosure.
Critics have warned that any new law could end up being used more widely than originally intended - similar to the controversial Regulation of Investigatory Powers Act, which has not just been used to tackle serious crime by police but also been used by local authorities to check on children's school catchment areas.
The Information Commissioner said public bodies not involved in dealing with serious crime or national security, such as the Department for Work and Pensions, should have to apply to a court before access was granted.
The plans have been criticised by civil liberties groups and several Conservative backbenchers.
Nick Pickles, director of campaign group Big Brother Watch, called the move "an unprecedented step that will see Britain adopt the same kind of surveillance seen in China and Iran".
"This is an absolute attack on privacy online and it is far from clear this will actually improve public safety, while adding significant costs to internet businesses," he said.
Dominic Raab MP, who made public the Information Commissioner's report, said it was "a plan to privatise Big Brother surveillance".
He said it "fundamentally changes the nature of the relationship between the state and the citizen", and turns every individual "into a suspect".
Fellow Tory David Davis warned that until now anyone wishing to monitor communications had been required to gain permission from a magistrate, but the planned changes would remove that protection.
He compared the idea with measures introduced by the Labour government - such as longer periods of pre-charge detention - which he said were justified at the time on security grounds but had proved to be damaging.
When Labour attempted to push for similar changes, the Conservative shadow home secretary at the time, Chris Grayling, said the government had "built a culture of surveillance which goes far beyond counter-terrorism and serious crime".
But Lord Carlile, the former official reviewer of terrorism legislation, said that "having come into government, the coalition parties have realised this kind of material has potential for saving lives, preventing serious crime and helping people to avoid becoming victims of serious crime".
He added: "Parliament will apply the most anxious scrutiny to any proposed legislation of this kind... what we have to protect the public from is arbitrary action by the government or any government authority."
Shadow Home Secretary Yvette Cooper said the police and security services had to be able to keep up with new technology, but there must be "clear checks and balances" on what they were able to do and "strong safeguards to protect people's privacy".
Even if the move is announced in the Queen's Speech, any new law would still have to make it through Parliament, potentially in the face of opposition in both the Commons and the Lords.
The Internet Service Providers Association said any change in the law must be "proportionate, respect freedom of expression and the privacy of users".