The Data Protection Commissioner has launched an investigation into a Facebook error that left hundreds of millions of user passwords exposed in an internal plain text file.

Last month, the social network admitted to the security lapse which meant company employees could have seen the passwords of users which are usually stored in an unreadable format.

The DPC is the lead supervising authority for Facebook in the EU.

In a statement it confirmed it had been notified of the incident and has started an inquiry, to determine whether the social network breached GDPR laws designed to protect people's data.

"The Data Protection Commission was notified by Facebook that it had discovered that hundreds of millions of user passwords, relating to users of Facebook, Facebook Lite and Instagram, were stored by Facebook in plain text format in its internal servers," the authority said in a statement.

"We have this week commenced a statutory inquiry in relation to this issue to determine whether Facebook has complied with its obligations under relevant provisions of the GDPR."

The social network warned that the incident could have affected hundreds of millions of Facebook Lite users, a downscaled version of the app for people with older phones or slow internet connections, as well as millions of main Facebook and Instagram users.

Facebook fixed the flaw after uncovering it January.

Its own investigation found no evidence that anyone outside Facebook got hold of the passwords, or that they were abused by staff internally.

The development is the latest in a string of headaches for Facebook chief executive Mark Zuckerberg in recent years, including rampant misinformation spread on the network, breaches of user data and allegations of political manipulation.

In a sign of the growing pressure on the platform from governments to change its business practices, Facebook revealed in its latest quarterly results that it had put aside 3 billion dollars to cover potential fines issued by the US Federal Trade Commission's ongoing inquiry into the firm, related to the Cambridge Analytica data scandal.