Former News of the World legal manager Tom Crone has told MPs he was "certain" he told James Murdoch about an email which indicated phone hacking at the paper went beyond one rogue reporter.
Mr Crone said the email was discussed and "it was the reason that we had to settle the case".
In a previous hearing, News Corp bosses Rupert and James Murdoch said they were not told of an email.
James Murdoch said on Tuesday he stood by his testimony to MPs.
The paper's former editor Colin Myler also told the House of Commons Culture, Media and Sport Select Committee that the email was discussed.
The committee also quizzed former legal director Jon Chapman and human resources director Daniel Cloke in a second round of questions from MPs examining phone hacking.
The discrepancy in the evidence between Mr Crone and Mr Myler and Rupert and James Murdoch hinges on a key document - known as the "for Neville" email.
The email was handed by the police to the lawyers of Gordon Taylor, the chief executive of the PFA, the footballers' union, who was suing the News of the World for invading his privacy by hacking into his mobile telephone.
When the News of the World's royal editor Clive Goodman was jailed for hacking into phones of the royal household in 2007, the paper insisted the practice was not more widely used.
'Authority to settle'
But the "for Neville" email is said to have implied that the NoW's chief reporter Neville Thurlbeck was also implicated in malpractices.
Giving evidence to the committee, Mr Crone said: "It was clear evidence that phone-hacking was taking place beyond Clive Goodman. It was the reason that we had to settle the case. And in order to settle the case we had to explain the case to Mr Murdoch and get his authority to settle.
"So certainly it would certainly have been discussed. I cannot remember the detail of the conversation. And there isn't a note of it. The conversation lasted for quite a short period, I would think probably less than 15 minutes or about 15 minutes. It was discussed. But exactly what was said I cannot recall."
It was at that meeting that James Murdoch authorised him to reach a settlement Mr Taylor, who was eventually paid £425,000 over the hacking of his phone, the committee heard.
But Mr Crone insisted that there was no "cover-up" by the company, as the email had been provided to them by the Metropolitan Police after it was seized from private investigator Glenn Mulcaire, who was jailed with Mr Goodman in 2007.
The former legal chief said his priority was to avoid cases being launched by four other individuals whose phones Mulcaire had admitted hacking.
"The imperative or the priority at the time was to settle this case, get rid of it, contain the situation as far as four other litigants were concerned and get on with our business," he said.
News International chairman James Murdoch told the culture committee earlier this year that he was not aware of the email when he approved an out-of-court settlement with Mr Taylor.
Mr Myler and Mr Crone later released a statement saying they did inform him of the email.
Mr Murdoch wrote to the committee on 11 August to expand on the evidence he gave that he was not shown or informed of the "for Neville" email.
Following Tuesday's proceedings, News International released a statement in which Mr Murdoch said: "My recollection of the meeting regarding the Gordon Taylor settlement is absolutely clear and consistent. I stand by my testimony, which is an accurate account of events."
He added: "I was informed, for the first time, that there was evidence that Mulcaire had carried out this interception on behalf of the News of the World.
"It was for this reason alone that Mr Crone and Mr Myler recommended settlement. It was in this context that the evidence was discussed. They did not show me the email, nor did they refer to Neville Thurlbeck.
"Neither Mr Myler nor Mr Crone told me that wrongdoing extended beyond Mr Goodman or Mr Mulcaire."
The BBC understands there will be no decisions until the committee meets next Tuesday on the recall of further witnesses, including Mr Murdoch and former News Corp senior executive Les Hinton.
Culture committee chairman John Whittingdale told the BBC last month that after they had heard more from Mr Myler and Mr Crone, MPs may well choose to recall Mr Murdoch to ask him further questions.
Labour MP Tom Watson, who has pursued the issue of phone hacking, has already called for Mr Murdoch to return.
But Mr Murdoch has said he "stands by his testimony" to the committee, in which he said: "If I knew then what we know now we would have taken more action around that and we would have taken more action to get to the bottom of these matters."
Giving evidence to MPs earlier on Tuesday, both Mr Chapman and Mr Cloke said they were "surprised" by claims from jailed former News of the World royal correspondent Clive Goodman that phone hacking was widespread.
Mr Goodman, the paper's former royal editor, sent the letter to Mr Cloke, the then News International group human resources director, saying he had been unfairly dismissed after being jailed for phone hacking in 2007.
Mr Goodman alleged that "other members of staff were carrying out the same illegal procedures" and that "this practice was widely discussed in the daily editorial conference".
Mr Cloke told the committee Mr Goodman's claim surprised not only him, but Mr Myler and Mr Crone: "Tom said that this was a surprise to him, as it was to everybody else."
Mr Chapman defended the email review he carried out in reaction to the letter as a "thorough" and a "careful and diligent exercise" but admitted it was limited in its scope.
He said there was "nothing that indicated reasonable evidence" of voicemail interception, and "no other illegal activity stood out," insisting that he did not recall at any point thinking there was material that would require the police to be brought in.
But he said it was an "employment related exercise" - not a criminal case - and he was looking for evidence of hacking linked to Clive Goodman's unfair dismissal appeal.
The Metropolitan Police's Operation Weeting is investigating claims of phone hacking at News of the World, which was shut down in July after it emerged that the phone of murder victim Milly Dowler had been hacked.