"I think the result we are now seeing in Libya is a direct result of the policies that were initiated by Paris and London at the start of this campaign," said Halevy
David Cameron has again been criticised for Britain's 2011 intervention in Libya, this time by a former Israeli intelligence chief.
Ephraim Halevy has warned that Libya will be the "biggest problem for Europe in the months to come".
The former head of the Mossad gave a forthright assessment of the situation in an exclusive interview with Sky News.
He said: "I believe the trouble coming from Libya is going to be immense.
"I think the operation originally launched by Britain and France turned out to be the biggest mistake committed by western Europe in recent years.
"I think the result we are now seeing in Libya is a direct result of the policies that were initiated by Paris and London at the start of this campaign."
Mr Cameron was singled out by Barack Obama a few weeks ago in rare criticism from a serving US President.
The Prime Minister was "distracted by a range of other things" after the 2011 invasion, Obama said, and Libya had been left in "a mess".
So far, action against Islamic State in Libya has been confined to a small number of US airstrikes.
Britain, and other European nations, are waiting on a formal request by a Libyan administration before intervening in the country.
If that is forthcoming around 1,000 UK troops are expected to deploy in a training capacity, supporting a larger Italian mission. An air campaign is also being considered.
Mr Halevy also said Britain was more secure as a member of the EU and should not leave.
"I have no doubt that the continued membership of Britain in Europe is vital and essential…to make Britain more secure.
"In order to craft a credible reply, a credible remedy to the Muslim communities' problems as traditional Europe faces them, there must be a common policy.
"A common policy can only be obtained if all the countries who are involved in this actually work together in unison in a very, very profound way.
"Otherwise, each country will go its separate way and it will take much, much longer and the end result will be in doubt."