Mr Bryant told the BBC: 'Very senior people at Buckingham Palace were very troubled by the appointment of Andy Coulson and tried to make it absolutely clear to the Prime Minister.
'I am not sure whether this information ever got directly to the Prime Minister, but it certainly got to senior figures at Downing Street.
'The Queen's grandchildren had their phones hacked. And quite probably other members of the Royal Household ... I think it would be perfectly natural for very senior members of the Royal Family to be very troubled about the appointment.
'After all, Andy Coulson was the editor of the News of the World when the royal princes' phones were hacked. That is not in dispute.
'And Andy Coulson resigned from the News of the World expressly because of the hacking of the royal princes' phones.'
Mr Bryant did not name the Queen directly. His claim prompted a furious denial from Downing Street. A No 10 source said the allegation was 'scurrilous' and 'complete