The report estimates the health costs of air pollution at up to £20.2bn a year
More could be done to prevent the early deaths of up to 50,000 people each year hastened by air pollution, MPs say.
A Commons Environmental Audit Committee report said failure to reduce pollution had put an "enormous" cost on the NHS and could cost millions in EU fines.
It said the UK should be "ashamed" of its poor air quality which was contributing to conditions such as asthma, heart disease and cancer.
The government accepted more could be done and would consider the report.
Pollutants such as ozone, nitrogen oxides and "particulate matter" - tiny particles - from transport and power stations have been blamed for contributing to early deaths.
Particulate matter is estimated to reduce people's lives by an average seven to eight months, while in pollution hotspots vulnerable residents, such as those with asthma, could be dying up to nine years early, the report says.
Air pollution also leads to damage to wildlife and agriculture, with ground-level ozone estimated to reduce wheat yields in the south of Britain by 5% to 15%.
EAC chairman Tim Yeo said: "Air pollution probably causes more deaths than passive smoking, traffic accidents or obesity, yet it receives very little attention from government or the media.
"In the worst affected areas this invisible killer could be taking years off the lives of people most at risk, such as those with asthma."
The health costs of pollution are estimated at between £8.5bn and £20.2bn each year, with the report also warning that the UK risks "substantial" fines for its failure to meet EU regulations on limiting pollutants.
The committee said major changes were needed to policies on transport, which accounts for up to 70% of pollution in towns and cities.
It called for measures such as national standards for low emission zones, like the one covering London, to make it easier and cheaper for local authorities to implement.
The report added more research was needed to understand the impact of particulates created by wear on tyres and brakes and those lying on the road which are whipped up into the air by passing vehicles.
The MPs said although climate change policies such as encouraging people to use public transport had helped, others policies, such as the use of diesel vehicles which were more fuel-efficient, were exacerbating air pollution by increasing production of particulates.
Liberal Democrat shadow energy and climate change secretary Simon Hughes said: "The government has scorned its legal obligations and instead gone full steam ahead with policies like Heathrow expansion that will lead to more illness and premature deaths.
"It is time ministers cleaned up their act."
The Department for Environment, Food and Rural Affairs said it took improving air quality very seriously and that it had made significant achievements such as reducing sulphur dioxide emissions by 86% since 1990.
The spokesperson added it was working across government to reduce emissions from transport and electricity generation.