The "cash-for-influence" allegations against four peers are "deeply shocking", the leader of the House of Lords said today.
Baroness Royall said the Lords Interests Committee had already met and launched an investigation into the claims.
Speaking to the Lords this afternoon, she added that the chairman of the Committee for Privileges, Lord Brabazon, is to review the sanctions available against those who break the rules of the House.
Responding to questions from peers, she said: "The allegations are indeed shocking but they are at this moment allegations. This is damaging, not just to the House but to Parliament and to politics as well."
She said members had a responsibility to adhere to "high standards" to ensure trust in parliamentary politics.
Lady Royall told peers: "I believe that all the rules pertaining to the complaints procedure, and indeed the issue of sanctions, need to be looked at and I'm confident that that's what the chairman of the privileges committee will do."
She also confirmed that the code of conduct for members of the House of Lords would be reviewed, saying: "I believe that is an issue that I will take up because that, I think, is what the House as a whole would wish to happen."
Lady Royall added that the affair had "brought this House into disrepute across the whole of the world".
But Lord Taylor of Blackburn, one of the peers named in the Sunday Times investigation, rose to his feet saying: "If I have done anything that has brought this House into disrepute, I most humbly apologise.
"I feel within my own conscience I followed the rules."
Lady Royall added: "This is a deeply shocking and depressing moment."
Lord Snape, another of those named by the Sunday Times, said: "May I first of all apologise to your Lordships for bringing, if I have done so, this House into disrepute.
"But may I say that these are allegations in a Sunday newspaper and may I appeal to noble Lords in all parts of the House to allow me the opportunity to refute those allegations."
Shadow leader of the Lords Lord Strathclyde said it was a "deeply shocking and depressing moment" for the House.
He said, if the allegations were true, those involved should be ready to take a period of absence.
"The inquiry (Lady Royall) has announced must be rigorous and swift so that we can find out what happened as soon as possible," he added.
Lord Goodhart, for the Liberal Democrats, called for tougher sanctions for breaches of rules of conduct, including suspension and expulsion.
Lady Royall was holding meetings today with the peers caught up in the row.
They are alleged to have asked for as much as £120,000 to help secure amendments to a Government bill on behalf of a business client. House of Lords rules ban paid advocacy.
As well as Lord Taylor of Blackburn and Lord Snape, the Sunday Times also named Lord Truscott and Lord Moonie. All of them deny any wrongdoing.
Lord Taylor and Lord Moonie have confirmed being approached by people describing themselves as lobbyists and offering money in return for assistance in seeking amendments to a bill on behalf of a business client.
But both denied reaching an agreement to do the work or receiving any money.
Liberal Democrat home affairs spokesman Chris Huhne has called for the Metropolitan Police to investigate.
Prime Minister Gordon Brown promised earlier that the allegations would be fully investigated.
"These are very serious allegations. It is precisely because of that, that Lady Royall announced yesterday that she would be investigating as a matter of urgency," he told reporters at the Foreign Press Association in London.
"We're determined to get to the bottom of what happened. Whatever action needs to be taken will be taken."