Mr Denham said Southampton alone received as many migrants from eastern Europe in 2005 as the Government thought would come to the whole country.
Speaking as Labour today called for a change in the rules on migrant workers, the Southampton Itchen MP said: "It became clear that the estimates that we had relied on were vastly wrong. We expected 15,000 migrants and 15,000 came to Southampton."
The former home office minister said while country had benefited "economically, culturally and socially" from migration he acknowledged: "There was an impact on wages and public services that people were concerned about.”
Southampton was estimated to have as many as 25,000 eastern European migrants.
Mr Denham said there was still a "debate still to be had" about overall numbers.
Labour leader Ed Miliband today admitted the party allowed too many Eastern European immigrants into country by lifting controls too early.
Mr Denham, a former business and skills secretary, said a Labour administration would focus on better enforcement of the minimum wage, a crack down on recruitment agencies who only supplied workers from particular countries, and would look at the types of jobs taken predominantly by foreign workers.
He said there needed to be “a level playing field”.
Ed Miliband promised new measures to prevent British people being ''locked out'' of jobs by foreign workers, including forcing firms to declare if they employ high numbers of immigrants.
Overseas-only employment agencies would be banned and an early-warning system set up to highlight areas where locals are ''dominated'' by an influx of overseas labour under the proposals.
While there cannot be set quotas on home-grown workers, urgent action is required to identify where British jobseekers need better training to compete, the Labour leader said.
Demanding that job centres be told of all firms where more than one in four staff is from overseas would form part of the new system to provide Whitehall and town halls with vital information.
Mr Miliband hopes to shift the focus of the debate from border controls, and what he says are ineffective Government caps on arrivals, towards the impact on people's daily lives.
While restrictions on new arrivals, including caps on people from any new EU member state, are necessary, reforming the jobs market is just as important, he argued.
Stricter enforcement of minimum wage laws and doubling fines to £10,000 would also form part of an effort to stop firms using cheap foreign labour to undercut domestic jobseekers.
Mr Miliband distanced himself from the rhetoric of his predecessor Gordon Brown, saying: ''I am not going to promise 'British jobs for British workers'.
''But we need an economy which offers working people a fair crack of the whip. The problem we need to address is in those areas and sectors where local talent is locked out of opportunity.''
He said Labour had to change its approach to immigration and recognise ''the costs as well as the benefits''.
The last Labour government under Mr Brown became ''too disconnected from the concerns of working people'', he said.
''We too easily assumed those who worried about immigration were stuck in the past, unrealistic about how things could be different, even prejudiced,'' he said.
''But Britain was experiencing the largest peacetime migration in recent history, and people's concerns were genuine.
''Why didn't we listen more? At least by the end of our time in office, we were too dazzled by globalisation and too sanguine about its price.
''By focusing too much on globalisation and migration's impact on growth, we lost sight of who was benefiting from that growth - and the people who were being squeezed. And, to those who lost out, Labour was too quick to say 'Like it or lump it'.''