Police are making unjustified searches of members of the public to provide "racial balance" to stop and search statistics.
Lord Carlile, the independent reviewer of terror laws, said he knew of cases where suspects were stopped by officers even though there was no evidence against them.
But a Scotland Yard spokesman said: "We can categorically say that no individual is targeted by police because of their culture, faith, race or religion."
Lord Carlile warned that police were wasting money by carrying out "self-evidently unmerited searches" which were an invasion of civil liberties and "almost certainly unlawful".
Lord Carlile, a Liberal Democrat peer and QC, condemned the wrongful use of Section 44 of the Terrorism Act 2000 in his annual report on anti-terror laws. He said police were carrying out the searches on people they had no basis for suspecting so they could avoid accusations of prejudice.
As the terror threat against Britain is largely from Islamist extremists, the figures show disproportionately more Muslims and therefore more Asians being searched than whites.
But the peer said police should stop trying to balance the figures, and it may be that an "ethnic imbalance" is a "proportional consequence" of policing.
Later, a Scotland Yard spokesman "categorically" denied that any person was targeted by police "because of their culture, faith, race or religion".
He said: "The threat to London from terrorism is real and serious and these powers are a vital tactic in our counter-terrorism strategy. We recognise the sensitivity surrounding these powers and are constantly looking to improve our use of the tactic."
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Trials are being carried out in four London boroughs - Southwark, Brent, Tower Hamlets and Newham - where use of the powers will be limited to certain locations and events, he said. The pilot will be evaluated before the force decides on new stop and search tactics later in the year.
