Other documents released show Britain received reports in 1942 revealing that more than 8,000 men and women died at Auschwitz concentration camp in a single month.
Jewish groups maintain that Britain knew more about genocide inside the camp than it has been prepared to admit.
Newly released material also reinforces claims that Britain knew of, or was able to predict, the Japanese attack on Pearl Harbor in 1941 but failed to warn the United States in an effort to draw her into the war.
The papers, released as part of the open government initiative, provide an unprecedented insight into the type of intelligence Churchill was receiving during a crucial period of the Second World War.
An intelligence digest was provided daily and sometimes more frequently for Churchill by Sir Stuart Menzies, known as 'C', the head of MI6, the secret intelligence service. The information was based on code-breaking by the Government Code and Cypher School, the predecessor of GCHQ, which has prepared the papers for public release from today.
A November 1941 report by the Japanese ambassador in Berlin to Tokyo states that Joachim von Ribbentrop, Hitler's foreign minister, claimed Germany was making preparations for attacking Britain.
But the ambassador reported Ribbentrop as saying: 'The Fuhrer believed conditions in Britain were bad and thought that as a result of Germany's future operations, it might be, without an invasion, Britain would be beaten.
''According to reports reaching Germany, the internal situation in Britain was not too good. For instance the split in the Conservative Party, the lack of confidence in Churchill, and the revolutionary ideas of Bevin, the Labour leader, were making internal conditions quite difficult.'
Ribbentrop reportedly claimed the war could be over by 1942 or 1943. Germany's plan was to drive Britain out of Europe entirely and leave her 'absolutely powerless'.
The archive material also reveals that Churchill received reports on deaths in German prison camps during August 1942, showing 6,829 men and 1,525 women died at Auschwitz alone.
A German police report stated: 'It appears that although typhus is still rife at Auschwitz, new arrivals continue to come in.' It said: 'As from 1/9/42 'natural deaths' among prisoners in concentration camps are to be reported apparently only in writing.'
Churchill was also told the Japanese embassy in Washington had been instructed to destroy all cyphers - foretelling the imminent attack on Pearl Harbor - three days before the attack on 7 December, 1941.
The Public Records Office said: 'None of the intercepts obviously indicate that British sources were aware in advance of the Japanese attack on Pearl Harbor, although it was clear that Japan was about to enter the war.
'Historians making a detailed examination of all the relevant material might draw a different conclusion.'Reuse content