The Washington Post reported that the program, called PRISM, targets known terrorism suspects or broadly collects data from other Americans via their Microsoft, Yahoo, Google, Facebook, PalTalk, AOL, Skype, YouTube and Apple accounts. The National Security Agency and the FBI use the program.
Google, Facebook and Yahoo denied in statement that they provide the government with direct access to their servers and data. In a statement, Google said it only shares such information with the government in accordance with the law, and reviews such requests with care.
"From time to time, people allege that we have created a government 'back door' into our systems, but Google does not have a 'back door' for the government to access private user data," the statement said.
A senior White House official told The Associated Press that PRISM involves "extensive procedures, specifically approved by the court, to ensure that only non-U.S. persons outside the U.S. are targeted, and that minimize the acquisition, retention and dissemination of incidentally acquired information about U.S. persons."
The official, who was not authorized to discuss the matter publicly and requested anonymity, added that Congress had recently reauthorized the program.
The latest revelations represent a dramatic escalation in the surveillance scandal that's currently casting a shadow over the Obama administration.
They prompted James Clapper, the Director of National Intelligence, to issue a rare statement late Thursday assuring Americans that the surveillance practices were constitutional and targeted terrorism suspects, not average citizens.
They "cannot be used to intentionally target any U.S. citizen, any other U.S person, or anyone within the United States," the statement said.
"Information collected under this program is among the most important and valuable foreign intelligence information we collect, and is used to protect our nation from a wide variety of threats."
Lawmakers, too, brushed off the concerns of Americans by pointing out that cellphone data surveillance, in particular, has been in place for seven years and is aimed at nabbing terrorists.
"I'm a Verizon customer; I don't mind Verizon turning over records to the government," Lindsey Graham, a Republican senator harshly critical of the Obama administration's surveillance of reporters' phone calls and emails, said on Fox News.
In a four-page court order obtained by Britain's Guardian newspaper, the National Security Agency requires Verizon to turn over "originating and terminating" telephone numbers as well as the location, time and duration of the calls. It also demands that the order be kept secret.
Former vice-president Al Gore called the practice "obscenely outrageous," while Verizon customers took to social media to lash out at a telecommunications giant suddenly ensnared in a public relations nightmare.
"So who didn't have the moral fortitude and the honour to stand up to our government and say no to collecting data on your customers?" Julie Morgia Duchene wrote on the Verizon Wireless Facebook page. "Who do you serve, Verizon? Shame on you."
Added another customer, Blaine Christian: "Once my contract is up in a month, I'm gone."
Verizon defended itself in a memo to employees on Thursday that was quickly forwarded to myriad news organizations.
The company's general counsel says in the memo that while "Verizon continually takes steps to safeguard its customers' privacy," it must hand over information when ordered to do so by a federal court.
Verizon isn't thought to be the only wireless carrier that has handed over phone logs for the past seven years.
The American Civil Liberties Union called for an immediate end to the practice in addition to a congressional investigation.
"It's a program in which some untold number of innocent people have been put under the constant surveillance of government agents," Jameel Jaffer, the ACLU's deputy legal director, said in a statement.
"It is beyond Orwellian, and it provides further evidence of the extent to which basic democratic rights are being surrendered in secret to the demands of unaccountable intelligence agencies."
Yet the practice has been in place since 2006 as a key component of the George W. Bush administration's warrantless surveillance program. It's based on a provision of the much-maligned Patriot Act that allows the government to amass such information during terrorism investigations.
"As far as I know, this is the exact three-month renewal of what has been in place for the past seven years," Democratic Sen. Dianne Feinstein, the chairwoman of the Senate intelligence committee, told an impromptu Capitol Hill news conference.
"This renewal is carried out by the (Foreign Intelligence Surveillance Court) under the business records section of the Patriot Act. Therefore it is lawful. It has been briefed to Congress."
She added: "This is called protecting America. People want the homeland kept safe."
Republican Saxby Chambliss agreed.
"This is nothing new. This has been going on for seven years," he said. "Every member of the United States Senate has been advised of this .... To my knowledge there has not been any citizen who has registered a complaint."
Chambliss defended the practice.
"It has proved meritorious because we have collected significant information on bad guys, but only on bad guys, over the years."
Mike Rogers, the Republican chairman of the House of Representatives' intelligence committee, told reporters that cellphone logs helped thwart a "significant" case of domestic terrorism "within the last few years."
Other senators on the Senate committee were less sanguine.
"This sort of widescale surveillance should concern all of us and is the kind of government overreach I've said Americans would find shocking," said Mark Udall, a Colorado Democrat.
The New York Times, meantime, published a scathing editorial late Thursday about U.S. President Barack Obama's continuation of the Bush-era practices. The paper has been assailing Obama for weeks over the Justice Department's surveillance of reporters in its attempts to determine who's been leaking national security information to the media.
The Obama administration "has now lost all credibility," the editorial read.
"Mr. Obama is proving the truism that the executive will use any power it is given and very likely abuse it."
Obama himself railed against such surveillance practices in 2007 as he ran for president, and the current scandals could tarnish his presidential legacy.
"I will provide our intelligence and law enforcement agencies with the tools they need to track and take out the terrorists without undermining our Constitution and our freedom," he pledged in a speech.
"That means no more illegal wiretapping of American citizens. No more national security letters to spy on citizens who are not suspected of a crime. No more tracking citizens who do nothing more than protest a misguided war. No more ignoring the law when it is inconvenient."
Obama flip-flopped on the issue shortly after clinching the nomination, however, and voted for a modified version of a bill that effectively allowed for the continuation of many of the Bush-era surveillance practices.
At a Senate hearing on Thursday into the Justice Department's budget, Attorney General Eric Holder said the White House has kept Congress well-informed on the data-mining.
"Members of Congress have been fully briefed as these issues, these matters have been underway," he said, adding he was "not really comfortable in saying an awful lot more than that" at a public hearing.