Failure to act would lead to the sites becoming “the ‘Wild West’ of the internet,” the Home Affairs Committee warned.
The report was published after the number of counter-terrorism arrests in Britain increased 35 percent between 2010 and 2015, although the country has not seen a mass casualty extremist attack since 2005’s London bombings.
An estimated 800 people with links to Britain have travelled to fight in Syria and Iraq.
Britain’s official international terrorism threat level is currently set at “severe”, meaning an attack is considered highly likely.
Keith Vaz, a senior MP from the main opposition Labour party who chairs the committee, called the internet “the lifeblood of Daesh and other terrorist groups”.
Daesh is another term for Islamic State jihadists, also known by the acronyms of ISIS and ISIL.
“Huge corporations like Google, Facebook and Twitter with their billion-dollar incomes are consciously failing to target this threat and passing the buck by hiding behind their supranational legal status, despite knowing that their sites are being used by the instigators of terror,” Vaz said.
The committee added: “These companies have teams of only a few hundred employees to monitor networks of billions of accounts and Twitter does not even proactively report extremist content to law enforcement agencies.
“If they continue to fail to tackle this issue and allow their platforms to become the ‘Wild West’ of the internet, it will erode their reputations.”
Twitter said last week that it had cut off 235,000 accounts in the last six months, raising the overall figure it had suspended to 360,000 since mid-2015.
The committee’s report said Google removed over 14 million videos worldwide in 2014 but called such steps a “drop in the ocean”.
Vaz said the British police unit dealing with extremist content online should be expanded.
Top talent from the video games industry should be recruited to help “counter-terrorist propaganda,” he said.
The committee also described as “lamentable” the amount of support available to the families of those who travel to fight in Syria and Iraq.
It called for the government’s controversial Prevent strategy, which aims to address the root causes of extremism in Britain, to be renamed Engage “to remove its already ‘toxic’ associations in the Muslim community”.
Critics say Prevent’s approach encourages people to view the whole Muslim community with suspicion and risks fuelling Islamophobia.