Angus MacNeil, a married father of three who represents the Western Isles, apologised for the hurt and embarrassment caused by his actions, which he "bitterly regretted".
Mr MacNeil, 36, whose wife was pregnant at the time, took the teenagers back to his room after meeting them in a bar in Orkney shortly in 2005 after becoming an MP.
One of the girls, Judie Morrison, 19, the daughter of a Church of Scotland minister, told a Sunday newspaper that they had engaged in "heavy petting" but were too drunk to have sex.
The Scottish National Party MP lodged the complaint with Scotland Yard which led to Tony Blair becoming the first Prime Minister to be interviewed by the police in a corruption inquiry.
Miss Morrison, who was 17 at the time, said that she and a friend, Catriona Watt, both from Stornoway on the Isle of Lewis, met the MP in a bar. She told the Sunday Mail: "He came over and was buying us lots of drink. We were having a good time and when he asked us to go to his room we said yes."We got to his room and we all ended up in one bed. We were having a giggle and he was being very suggestive.
"He took off some of his clothes and I was sitting on the end of the bed and Catriona was lying beside him in the bed.
"We all ended up kissing and cuddling together but I was not kissing and cuddling with Catriona. I did heavy petting and I kissed him, we both did that with him."
She added: "He was excited but we did not have full sex. We were all too drunk."
Miss Watt, 19, said: "I kissed and cuddled and fondled him." She added: "I knew who he was and I know why this is now news."
Both girls are music students at the Royal Scottish Academy of Music and Drama in Glasgow.
Mr MacNeil said: "I bitterly regret that this incident occurred, and I apologise to my family for causing them embarrassment and hurt.
"I also apologise to the young women involved and their families. I really should have known very much better. Yes, some foolishness took place at a post-ceilidh party, which was wrong and stupid.
"There is no allegation that anything further happened and I wish to make that absolutely clear. It was a lapse of judgment two years ago, for which I am sorry.
He added: "I am really angry with myself for allowing a Labour-supporting newspaper the opportunity to divert attention from the substantial political issues which I have been pursuing."
Last night the Scottish National Party accused Labour, which is trailing in the opinion polls in next month's Scottish Parliament elections, of dirty tricks. A member of the party's shadow Scottish cabinet said: "Every election that I have ever fought there have always been stories like this. Usually they appear in Labour papers the weekend before election, but this year, because of the polls, they are getting these attacks in early." Mr MacNeil was born on the island of Barra, off Scotland's west coast, in 1970.
A native Gaelic speaker, he studied civil engineering at Strathclyde University in Glasgow. He worked as a BBC reporter and a teacher before becoming an MP.
He has three children.Source Telegraph.