Business Secretary Vince Cable has apologised "unreservedly" after confidential documents were discovered in bins left outside his constituency office.
Unshredded paperwork, including correspondence from ministers and letters which contained personal details of his constituents, were found dumped in transparent recycling bags outside the Liberal Democrat's Richmond and Twickenham HQ over a nine month period.
Mr Cable admitted the blunder was an "unacceptable breach of privacy" and said the Information Commissioner's Office had been notified.
He could face a fine of up to £500,000 if he is found to have flouted data protection laws.
In a statement the politician said he would take "full responsibility" for the error.
"I have been alerted to a breach of data security at my Twickenham constituency office," he said.
"A system is in place for shredding of confidential files and for safeguarding case work.
"Nonetheless, some correspondence which should have been protected was placed in bags for recycling outside the office.
"I apologise unreservedly to all my constituents for what has clearly been an unacceptable breach of their privacy."
The cabinet minister said he was alerted to the breach on Wednesday and has since instructed his office to introduce a more "secure" system for handling sensitive information.
"The staff responsible accept that this was an entirely inappropriate way to handle such paperwork and that this was a serious error," he added.
"Both I and my constituency team are dedicated to meeting the highest standards for the people of Twickenham. I am very sorry that in this instance they were not met."
A local resident began collecting the hoard of sensitive documents from the office's recycling bags in February this year before handing them to a local newspaper, the MP said.
The Information Commissioner has the power to fine registered data controllers who "seriously contravene" the Data Protection Act.
Surrey County Council was hit with a £120,000 penalty in June this year after sensitive personal information was emailed to the wrong recipients on three separate occasions.