Underlings did not tell him how pervasive it was when he took over News Corp.’s British newspaper publishing arm, he said.
He agreed with a suggestion that the reason was because they knew he would put a stop to it.
“I think that must be it, that I would say, ‘Cut out the cancer,’ and there was some desire to not do that,” he told the Leveson Inquiry into press ethics.
Former Murdoch employees testified earlier that they told him about the problem.
He was testifying before an independent British inquiry into journalistic ethics prompted by phone hacking at the defunct News of the World, once the flagship British Sunday tabloid of News Corp.
The scandal has reverberated through the British political establishment, led to dozens of arrests on suspicion of criminal activity and forced News Corp. to pay hundreds of thousands of pounds in compensation to the victims of phone hacking.
Tuesday’s hearing revealed the depth of the links between the Murdoch family and British politicians, with Murdoch saying he had had drinks with David Cameron at a pub before he became prime minister and dined with him once he was in office.
Leveson Inquiry lawyer Robert Jay pressed Murdoch over the extent of his contact with politicians as the company moved to take full control of satellite broadcaster BSkyB, a bid that collapsed because of the phone-hacking scandal.
James Murdoch and his father, Rupert Murdoch, have been hammered over the past year about what they knew about phone hacking by people working for them.
Rupert Murdoch is scheduled to appear Wednesday and perhaps Thursday morning at the inquiry.
The younger Murdoch has already been called twice to testify before British lawmakers and resigned from a number of top management positions at British subsidiaries of his father’s media empire.
He and his father have always denied knowing about the scale of phone hacking, which police say could have affected thousands of people, ranging from celebrities and politicians to crime victims and war veterans.
James Murdoch said Tuesday that he had no reason to look into illegal eavesdropping by his employees when he took over the company’s British newspaper subsidiary in December 2007.
A News of the World reporter and a private investigator had been sent to prison that year for hacking the phones of the staff of Princes William and Harry, but Murdoch said he had been assured that the problem went no further.
“I was not told sufficient information to go and turn over a whole bunch of stones that I was told had already been turned over,” he said. “I don’t think that, short of knowing they weren’t giving me the full picture, I would’ve been able to know that at the time.”
The journalist who went to prison, Clive Goodman, had been saying that phone-hacking went beyond his case, Leveson Inquiry counsel Robert Jay said.
“I was not aware of that,” Murdoch replied.
He told the Leveson Inquiry on Tuesday that he did not decide what went into the company’s British tabloids, The Sun and the News of the World, relying on his editors to make the decisions.
He was also pressed on his relationship with British politicians, including former Prime Minister Tony Blair and the current leader, Cameron.
He acknowledged meeting with them, but denied having lobbied them improperly about his family’s business interests.
And he denied having made a “crass calculation” about how The Sun’s endorsement of Cameron’s Conservative party before the 2010 elections would affect News Corp.
Dozens of people have been arrested in criminal investigations into phone and e-mail hacking and police bribery, and police asked prosecutors last week to charge at least eight people.
The suspects include at least one journalist and a police officer, the Crown Prosecution Service said, declining to name them.
No charges have been filed, and the Crown Prosecution Service said it did not know when a decision would be made about charges.
The British government set up the Leveson Inquiry, the independent investigation that summoned the Murdochs, in the wake of the phone-hacking scandal. Two parliamentary committees also are looking into media conduct.
James Murdoch, 39, resigned as chairman of British Sky Broadcasting this month, saying, “I am determined that the interests of BSkyB should not be undermined by matters outside the scope of this company.”
Rupert Murdoch testified before lawmakers in July alongside his son.
News Corp. shut down its British Sunday tabloid, The News of the World, last summer after public outrage at the scale of illegal eavesdropping its journalists did in search of stories.
The British lawyer representing dozens of alleged News Corp. phone-hacking victims was in New York last week, exploring options for a U.S. case against the company.
Attorney Mark Lewis said he is representing three or four new clients, one of whom is believed to be a U.S. citizen, who say their phones were hacked while they were on U.S. soil.
There are also many potential new clients, Lewis said.
“As I’ve been traveling here,” he said, “I’ve been contacted by many people who’ve had, so they say, similar problems — not just hacking but maybe being trailed or have fallen out with some American Murdoch News Corp. company and then found themselves, as they would say, at the wrong end of investigations, the wrong end of information gathered.”