The Press Complaints Commission said the Daily Telegraph had produced material "in the public interest".
But it said the paper had not had enough evidence to justify what it called "a fishing expedition".
Among those taped by reporters posing as constituents was Business Secretary Vince Cable, who was recorded saying he had "declared war" on Rupert Murdoch.
Other Liberal Democrat MPs secretly recorded by the paper's reporters included employment relations minister Ed Davey, pensions minister Steve Webb, Scottish Secretary Michael Moore, transport minister Norman Baker and health minister Paul Burstow.
The PCC ruled the newspaper launched the "disproportionately intrusive attention" without sufficient reasons and said it would issue fresh guidance over the acceptable use of subterfuge.
Mr Cable, one of the most senior Lib Dems in the coalition government, came under fire after he spoke out against Mr Murdoch - at a time when he had ultimate responsibility for the tycoon's bid to take full control of broadcaster BSkyB.
'Undermining democracy' Continue reading the main storyThe PCC has consistently ruled that 'fishing expeditions' where newspapers employ subterfuge... without sufficient justification are unacceptable”End Quote Stephen Abell PCC director He told journalists from the Daily Telegraph - who were attending a constituency surgery in his Twickenham constituency and whom he believed were local residents - that Mr Murdoch's "whole empire was under attack".
Referring to the BSkyB bid, Mr Cable told them he had "declared war" on Mr Murdoch, adding "I think we are going to win".
Despite speculation that he might be sacked for the remarks, Mr Cable retained his position in the Cabinet although he was stripped of powers to oversee the BSkyB bid and other media takeovers - which were handed to Culture Secretary Jeremy Hunt.
The PCC received about 200 complaints after the stories were published in December, led by Commons Leader Sir George Young who said the undercover methods undermined democracy.
The newspaper told the PCC it had proved that Lib Dem ministers "were not consistent in their private and public statements" about the coalition.
But the watchdog said the initial evidence was insufficiently strong to warrant the level of intrusion.
It said the ministers concerned were asked "to comment on a series of policy issues with the evident intent of establishing on which subject they might say something newsworthy".
PCC director Stephen Abell said: "The commission has consistently ruled that 'fishing expeditions' where newspapers employ subterfuge and use clandestine devices without sufficient justification are unacceptable.
"The issue of how journalists make use of subterfuge deserves scrutiny, and indeed goes much wider than the Telegraph's actions on this occasion.
"The PCC takes this subject seriously and will issue further guidance on this area with a view to ensuring high standards across the industry."
Clause 10 of the Editors' Code of Practice bars the obtaining or publishing of material "acquired by using hidden cameras or clandestine listening devices".
Engaging in misrepresentation or subterfuge "can generally be justified only in the public interest and then only when the material cannot be obtained by other means", it states.
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