Equalities Minister Aodhán Ó Ríordáin said the system needed urgent reform and he expected an expert group to make shake-up recommendations within weeks.
People Before Profit TD Richard Boyd Barrett warned the group had lost credibility after the Irish Refugee Council withdrew from it as he called for an apology to be made to people kept in direct provision.
Mr Boyd Barrett said asylum seekers should be given the right to work while awaiting a decision on their status.
Mr Ó Ríordáin noted Ireland was unusual in the EU in not allowing asylum seekers to work as he revealed 500 of the more than 4,000 people in direct provision had permission to remain in the country but stayed in the centres because they could not afford to move out.
Members of the Public Service Committee questioned why private companies were being paid some €55m a year to run provision centres, but were not required to provide expert help to people.
TDs complained at the way people in the centres were not allowed to cook for themselves, saying this was having a negative impact on family life.
Mr Ó Ríordáin has previously stated that the direct provision system is “inhumane”.
Meanwhile, there were heated exchanges at the Oireachtas Justice Committee as members of the Immigration Control Panel appeared before it.
A number of TDs and senators expressed anger at the contents of the group’s statements which called for much more emphasis on the deportation of undocumented workers.
Branding them “illegals”, the ICP said they were giving “two fingers” to the State.
Labour TD Anne Ferris expressed concern at the group’s remarks, saying: “This day two weeks ago I visited Auschwitz and… there is a common thread between reading this statement and what I heard and learned in Auschwitz.”
Áine Ní Chonaill of the Immigration Control Panel branded the comparison “outrageous”, and the TD “regretfully withdrew” her remarks after an intervention by the committee chair.
Fine Gael TD Gabrielle McFadden branded the tone of the ICP’s statement “obnoxious”.