The monitoring station intercepts and processes huge numbers of emails, phone calls and Web traffic on behalf of Western intelligence agencies, The Independent said. The gathered information then is scrubbed for intelligence and passed to Britain's Government Communications Headquarters intelligence agency and shared with the National Security Agency in the United States.
British government officials said the station is vital in the West's war on terror, providing a vital "early warning" system for potential attacks around the world.
The Independent said it wasn't revealing the station's exact location but information on its activities was contained in the leaked documents obtained from the NSA by Snowden, who was granted temporary asylum in Russia after he leaked data about the NSA's massive Internet and cellphone monitoring system to The Guardian.
Intelligence sources denied the facility's charge was blanket collection of all communications and said it was targeted at security, terror and organized crime, The Independent reported.
The Middle East facility is considered a valuable site by Britain and the United States because it can access submarine cables in the region, The Independent said.
Information about the project was in 50,000 British intel documents Snowden downloaded in 2012. Many of them came from an internal site called GC-Wiki, which is similar to the secret-spilling website WikiLeaks.
The disclosure came as the Metropolitan Police announced the launch of a terrorism investigation into material found on the computer of David Miranda, the Brazilian partner of Guardian journalist Glenn Greenwald, who reported the Snowden leaks.
Scotland Yard said material examined so far from Miranda's computer was "highly sensitive" and "could put lives at risk" if disclosed.
The Middle East data-gathering operation is part of an Internet project still being developed by GCHQ and is part of a surveillance and monitoring system code-named "Tempora," The Independent said. Communications are tracked by satellite and by tapping into underwater cables.
The Middle East station was established under a certificate signed by then-Foreign Secretary David Miliband authorizing GCHQ to monitor and store for analysis data that passed through the network of cables linking the Internet globally, The Independent said.
The certificate authorized the intelligence agency to collect information about the "political intentions of foreign powers", terrorism, proliferation, mercenaries and private military companies, and serious financial fraud.
The certificates are reissued every six months and can be changed by ministers, the London publication said. GCHQ officials may target anyone who is overseas or communicating from overseas without further checks if they believe the targets are within the terms of an up-to-date certificate.