Today's developments follow an inquiry by the Serious and Organised Crime Agency (Soca).
Mliband said inquiries were still under way in other countries and that it would not be appropriate for "legal and other reasons" to release the Soca report in full.
But he said that, given the quality of the forgeries, it was "highly likely" that they were made by a state intelligence service.
"This, together with other enquiries, and the links to Israel established by Soca, [means] we have concluded that there are compelling reasons to believe that Israel was responsible for the misuse of British passports," Miliband told MPs in a statement this afternoon.
Miliband said the UK government took the matter extremely seriously and had written to the Israeli administration seeking assurances that such misuse would never happen again.
The misuse of UK passports not only presented a hazard to British nationals in the region but also represented a "profound disregard" for the sovereignty of the United Kingdom, the foreign secretary said.
"The fact that this was done by a country that is a friend with significant diplomatic, cultural, business and personal ties to the UK only adds insult to injury. No country or government could stand by in such a situation."
Miliband told MPs that the Soca report had been studied by the prime minister and was presented to the cabinet earlier today.