The profession's regulatory body, the Office for the Supervision of Solicitors, withdrew the certificate to practise from husband and wife Rai and Gowri Sivakadacham, who run two firms in north London.
Allegations against the firms under investigation include paying interpreters and refugees to tout for asylum business, against rules drawn up by the Law Society, and claiming high levels of legal aid while providing a minimal service.
Mike O'Brien, the Home Office Immigration Minister, who is also a solicitor, said: "This is an area of the seedier side of my profession. And it desperately needs cleaning up." He added that the investigation concerns some individuals, some particular cases and some entire firms.
The Government had become alarmed as the legal aid budget for asylum cases had almost doubled to pounds 50m in two years, while the number of refugees grew by just a third, from 29,600 to 46,000.
The Law Society said: "We want the cowboys out. Just one is enough for us to take it very seriously. This is a problem area and the clients, whether asylum-seekers or even economic migrants, have their rights and are very vulnerable. If solicitors do not do the work well then these clients lose out. If they are wrongly sent back to their countries they could lose their lives. It's that serious."
Malpractice among solicitors will be raised in the Commons tomorrow during a debate on the Immigration and Asylum Bill.