Communications Minister Pat Rabbitte has branded the libelling of Fr Kevin Reynolds as the worst "lapse" in the history of RTE.
The national broadcaster was under siege today as it faces into a Cabinet-ordered inquiry into the affair.
RTE has also suspended the new series of Prime Time Investigates as the scandal engulfs senior Montrose figures.
Mr Rabbitte today insisted that the public has a right to know why the mistake occurred.
"The issues involved are very grave. I don't recall a lapse of this magnitude before in the history of RTE and there is public concern and public disquiet about the case of Fr Kevin Reynolds," the minister said.
Director general Noel Curran admitted the journalists involved had made "one of the gravest editorial mistakes ever made" at RTE.
And in an apparent U-turn, he did not rule out the possibility of resignations, with recommendations due to be made to December's board meeting.
RTE paid out a huge settlement to Ahascragh, Co Galway, parish priest Fr Reynolds after wrongly accusing him of raping a minor and having a child by her while working as a missionary in Kenya 30 years ago.
The false allegations were aired last May in the controversial Mission to Prey programme.
Mr Rabbitte requested that the Broadcasting Authority of Ireland's (BAI) compliance committee to examine if RTE "met its statutory responsibilities around objectivity, impartiality and fairness".
By law, RTE will have to hand over any documents requested by the investigating officer.
The key editorial staff involved in the broadcast were reporter Aoife Kavanagh, producer Mark Lappin, executive producer of Prime Time Investigates Brian Pairceir, current affairs editor Ken O'Shea and managing director of news Ed Mulhall.
Mr Lappin has since moved to London to work for CNN.
Taoiseach Enda Kenny said there had been a "grievous loss of standard" in RTE. He said there should "clearly be a completely independent investigation into this to ascertain the circumstances in which it arose".
The BAI has two months to complete its investigation before reporting back.
Mr Curran said, while he took "absolute responsibility" for the libelling of Fr Reynolds, he was not involved in clearing the programme for broadcasting.
He added that the station has to go through "due process" and would now engage withthe BAI.
"You have to balance accountability with not killing off investigative journalism in this organisation," he added.
Mr Curran said one of the issues is why Ms Kavanagh responded to a solicitor's letter sent to the broadcaster on behalf of Fr Reynolds.
Fr Reynolds had offered to undergo a paternity test before the programme was broadcast.