There were 408,000 more people living here in 2008, the Office for National Statistics said.
That takes the total population to 61.4 million - an increase of more than two million over 2001.
The increase was driven by a baby boom as fertility rates shot up to their highest rates in a generation.
The increase is the highest since modern records began in 1972 and more than twice the increase of 2001 when the population rose by 201,000.
Statisticians are now trawling historic records to confirm it is the biggest population increase in history.
For the first time in nearly a decade natural changes to the population caused by shifts in birth and death rates have overtaken immigration as the biggest factor affecting population growth.
The vast wave of immigrants who came here from Eastern Europe after the EU expanded in 2004 has slowed to a trickle, as the recession took hold, the figures showed.
Arrivals from the A8 countries of Eastern Europe fell by more than a quarter - 28% - from 109,000 to 79,000 in the year to December last year.
More Eastern European immigrants went home in the same period - up by more than 50% to 66,000.
Overall migration levels - the numbers arriving minus those leaving - fell 44% to 118,000 - the lowest since EU enlargement.
The most recent figures showed a huge increase in returns, as the number of A8 workers registering for employment fell 42% to 116,000 in the year to June this year.
Chief statistician Karen Dunnell said the emigration was probably due to the economic downturn.
She said: "You have to say that probably the unemployment and the economic situation, given that quite a lot of people from the A8 countries are coming to work, is probably having an impact."
The ONS later confirmed the increase in population was the highest in nearly 50 years.
In 1962 the population rose by 484,000 and in 1947 the post-war baby boom drove up population levels by more than half a million (551,000).
The surge in Eastern Europeans returning home and the decline in arrivals meant they added only 13,000 to the total population last year.
The ageing population meant there were a record number of mid-octogenarians. There are now 1.3 million over 85s, making up 2% of the total.
Statisticians said the increase in birth rates was caused in part by higher fertility rates among British nationals, and in part by immigration, as foreign-born mothers tend to have more children. There are also more women of child bearing age.
There were 791,000 babies born in the UK last year, an increase of 33,000 on a year earlier, and almost twice the rise seen at the start of the decade.
ONS statistician Roma Chappell highlighted the significance of the shift.
"That's actually quite exciting because it's the highest fertility rate we have seen in the UK for some time.
"You have to go all the way back to 1993 to find a time when the fertility rate went higher.
"For the first time in a decade natural change exceeded net migration as the main driver of population change."
"Prior to 1998 natural change was higher than net migration. This isn't a new phenomenon for the UK.
"If you go back it was quite common for natural change to exceed net migration as a driver of population growth."
She added: "The balance is still positive so the population is still growing due to net migration but the increase is the lowest it has been since accession in 2004."
"What has driven this is the emigration of non-British citizens especially citizens of the A8 countries."
The population is now growing by a rate of 0.7% every year, more than double the rate in the 1990s and three times the level of the 1980s.
Border and Immigration Minister Phil Woolas said the figures showed migrants were coming here to work then returning home.
He said: "The fall in net migration is further proof that migrants come to the UK for short periods of time, work, contribute to the economy and then return home.
"Our new flexible points based system gives us greater control on those coming to work or study from outside Europe, ensuring that only those that Britain needs can come.
"Britain's borders are stronger than ever before. Our border controls in northern France are stopping record numbers of migrants reaching our shores - 28,000 in 2008.
"We are rolling out ID cards to foreign nationals, we have introduced civil penalties for those employing illegal workers and from the end of next year our electronic border system will monitor 95% of journeys in and out of the UK."
"The British people can be confident that immigration is under control."
Shadow immigration minister Damian Green accused Home Secretary Alan Johnson of "sleeping on the job" over population growth.
He said: "Alan Johnson says he doesn't lose sleep over Britain's population growth. Perhaps he should, instead of sleeping on the job.
"These figures show our population is still rising fast, even when the recession is driving hundreds of thousands of people to leave.
"This puts added pressure on housing and transport, and shows that there is still no proper control over immigration numbers."
Sir Andrew Green, chairman of protest group Migrationwatch UK, said overall foreign immigration was "virtually unchanged" and the population was still due to cross the 70 million mark within 25 years.
He said: "It is the usual Government spin to claim these numbers as a success for immigration policy despite the fact that foreign immigration is virtually unchanged at about half a million a year.
"What has really happened is that EU citizens have voted with their feet; the number leaving has doubled in the face of the deep recession in Britain but EU migration is something over which the Government have no control whatever.
"As for the Government's much vaunted points-based system, it has had very little effect so far; work permit immigration fell last year by 16,000, or roughly 3.5% of foreign immigration.
"The bottom line is that the population of the UK will exceed 70 million within 25 years even at these levels of immigration."
Tim Finch, head of migration at think tank the Institute for Public Policy Research (Ippr), said the figures showed high immigration levels were not inevitable, and attacked "irresponsible scaremongering" surrounding the issue.
"Ippr has pointed out for some time that migration flows go in cycles, and these latest figures for 2008 indicate that after a number of years in which net migration was high, it is now declining sharply - almost certainly because of a combination of the economic downturn, the short-term nature of much migration from new EU countries, and the impact of stronger controls and management put in place by the Government," he said.
"There has been a lot of irresponsible scaremongering about immigration in recent years which was based on the false assumption that high net migration into the UK was inevitable for years to come.
"As our recent report on re-migration showed, migration flows go both ways and we now need to be thinking about how our managed migration systems can continue to attract and retain the migrants we need to help our economy to recover and grow."
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