In yet another day of sensational allegations heard at the High Court, Mr Fayed revealed for the first time that he had bribed the former minister with sums in excess of pounds 100,000.
Mr Fayed's latest revelations came as he also accused the former Home Secretary, Michael Howard, of receiving bribes from his late business rival Tiny Rowland, and that the Duke of Edinburgh "masterminded" the death of Mr Fayed's son, Dodi, and Diana, Princess of Wales, in Paris two years ago.
Mr Fayed's accusations emerged during his second day giving evidence in the libel action brought against him by Mr Hamilton, a former Conservative minister, over claims that he had asked questions in the Commons in return for cash and other gifts. Mr Hamilton, the former Conservative MP for Tatton, is suing Mr Fayed over a January 1997 Channel 4 Dispatches programme.
He alleged in the programme that Mr Hamilton had corruptly demanded and accepted cash payments, gift vouchers and a free holiday at the Paris Ritz in return for asking parliamentary questions on behalf of Harrods.
Mr Fayed, who denies libel and pleads justification, claims that Mr Hamilton received cash sums of up to pounds 30,000 and gift vouchers worth pounds 8,000.
But under extensive cross-examination that figure more than doubled to pounds 110,000 in a series of exchanges between Mr Fayed and Desmond Browne, the QC for Mr Hamilton.
Mr Browne asked Mr Fayed about a taped conversation he had in September 1994 with Brian Hitchen, then editor of the Sunday Express. He said Mr Hitchen had asked "how much did you pay him?", referring to Mr Hamilton.
Mr Fayed told the editor, "through Ian Greer, maybe over pounds 50,000".
Mr Browne put to him: "Are you telling the jury now that Mr Hamilton received over pounds 50,000 through Ian Greer from you?"
Mr Fayed: "That's right."
Mr Browne: "And that in addition he received cash directly from you?"
Mr Fayed agreed.
Mr Browne: "How much in addition to the pounds 50,000 received through Mr Greer do you say Mr Hamilton got from you?"
Mr Fayed replied: "Over pounds 40,000. It's possible pounds 60,000. I can't remember precisely, it was many years ago."
Mr Browne: "You are saying that it is possible in combination between the money that Mr Hamilton got through Ian Greer and the cash he got directly from you, he got between pounds 90,000 and pounds 110,000?"
Mr Fayed: "It's possible."
The inflation of his original bribe claim came as he made an astonishing attack on Mr Howard.
Mr Fayed also claimed that the former Conservative cabinet minister had accepted between "pounds 1m and pounds 1.5m" in bribes in return for a critical Department of Trade and Industry (DTI) inquiry into the Egyptian-born tycoon's takeover of the House of Fraser stores and Harrods.
Then followed a series of acrimonious exchanges when Mr Browne asked Mr Fayed: "Did you not say that Prince Philip had masterminded the deaths because he had German blood and Nazi views?"
Mr Fayed responded: "I have the right to say what I feel and what I believe. I have a lot of support from the public, I receive millions of letters.
"Let Prince Philip sue me, let MI5 and MI6 sue me... they think they are above the law... Prince Philip knows what happened, I shall find the truth. I have already written to the Prime Minister, the Home Secretary and Foreign Secretary... I shall find the truth."
He continued: "I was close to Princess Diana I know what happened to Princess Diana over 20 years of marriage. I know what Prince Philip did to her."
Mr Fayed also claimed that criticism of him in the media was motivated by politics and orchestrated by the Establishment. He said he had been frequently attacked by "right-wing newspapers" and a prominent editor he accused of working for the security services.
He continued: "I have been attacked over 300 times by the Sunday and Daily Telegraph, why? That Dominic Lawson [editor of The Sunday Telegraph] works for MI6, his brother-in-law works for MI6."
Referring to the DTI report into the Harrods purchase, Mr Browne said that Mr Howard had earned Mr Fayed's "undying enmity" for appointing the inspectors in April 1987.
Mr Browne said the accusation that Mr Howard had been bribed by Mr Rowland, head of Lonrho, was "utterly baseless".
Mr Fayed responded: "Why are you so sure it was baseless? I am the person who knows exactly how it happened - a million pounds and half a million. He was paid through his uncle Harry Landy, who is a crook. I have challenged Mr Howard to sue me, I have called him a crook. If he had any dignity or honour and knows he hasn't committed a crime, he would sue me."
Mr Browne said the DTI report in July 1998 found that Mr Fayed and his brothers had dishonestly misrepresented their origins and wealth, business interests and resources to the Secretary of State, the Office of Fair Trading, the press, the House of Fraser board and shareholders, and their own advisers.
Mr Fayed said he did not accept the findings, adding that the "naive inspectors built on what Tiny Rowland put to them. There is no documentation, no proof. It was all built on hearsay - Tiny Rowland's lies and corrupt witnesses. The findings are not acceptable, not credible, because I'm not able to cross-examine witnesses who have been paid millions." The Harrods owner added that the report had been sent to various regulatory bodies, the police and the Director of Public Prosecutions, but he has never been questioned by them, let alone charged, over it.
The trial continues.