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David Chaytor admitted to The Daily Telegraph that he claimed 13,000 pounds (about 20,000 U.S. dollars) in interest payments for a mortgage loan that had already been paid off.
"In respect of mortgage interest payments, there has been an unforgivable error in my accounting procedures for which I apologize unreservedly," Chaytor told the Telegraph in a statement.
"I will act immediately to ensure repayment is made to the Fees Office (of the House of Commons)."
Chaytor was suspended after he was caught in The Daily Telegraph's continuing publication of previously secret expense claims. His Labour Party colleague, Eilliott Marley, had been suspended after admitting the same offense in a deepening scandal that has enraged the public.
"After speaking to David Chaytor this morning, the chief whip has suspended him from the privilege of membership of the Parliamentary Labor Party pending further investigations by the Parliamentary Commissioner for Standards." Sky News quoted a Downing Street spokesman as saying.
With the suspension of two MPs and a junior minister voluntarily stepping down, Prime Minister Gordon Brown's Labour Party has been hardest hit by the deepening scandal that has tarnished all three of the country's main political parties.
Leaked lawmaker expense claims for horse manure, pornography and chandeliers, among other items, have infuriated voters, many of whom have lost jobs and homes during Britain's deepening recession.