Home Office minister David Hanson said a device, which reports have suggested was a camera, was found in a routine check at the Ministry of Housing, Communities and Local Government.
The building is the base for the Home Office, responsible for policing in England and Wales and national security, and MHCLG, which is responsible for housing and planning policy in England.
The device was discovered in a ceiling panel, The i Paper reported.
Concerns were raised the device may have been placed near offices where discussions were held over the proposed Chinese "mega-embassy" that is planned for the City of London.
Hanson said the device was found in a communal area rather than near ministerial offices.Â
Members of the House of Lords raised fears it may have been where civil servants working on the application may have been.
Conservative shadow Home Office minister Evan Davies said he believed it was "highly likely" China was behind it because of the embassy bid.
The application was approved earlier this year.
Hanson indicated members of the security services were involved in the investigation.
"In line with the practice of successive administrations, this government does not comment on the detail of internal security matters," he said.
"I can confirm an electronic device was found in a communal area of the Ministry of Housing, Communities and Local Government during a routine security check. The device was not in, or near ministerial offices, and is currently being investigated by the appropriate agencies.
"The government have also looked into the Daily Mail report and previous coverage and have not discovered any evidence of a tracking device being placed in prime minister's cars. This is based on inquiries made at the time and more recently."
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