A report in UK newspaper The Guardian suggests that British spy agency GCHQ have secretly intercepted millions of Yahoo users webcams from around the world.
Yahoo has denied any knowledge of the interception, describing it as a 'completely unacceptable' breach of security.
In a statement GCHQ has said all of their actions are completely legal.
Sexually explicit images were among those collected by the agency in a sting called 'Optic Nerve', where images of 1.8 million users were collected between 2008 and 2010.
The report was originally part of the documents leaked by Edward Snowden and warned that sexually explicit images would be unintentionally collected during the operation.
It read: "Unfortunately, it would appear that a surprising number of people use webcam conversations to show intimate parts of their body to the other person."
Yahoo said in a statement: "We were not aware, nor would we condone this reported activity. This report, if true, represents a whole new level of our users privacy that is completely unacceptable, and we strongly call on the world's governments to reform surveillance laws."
