Commons Speaker John Bercow called for the authorities to face up to the issue, predicting that the Victorian 19th century building would become unusable in less than 20 years unless it underwent a massive and expensive overhaul.
The scale of the task is so vast that MPs and peers could have to move out for five years to allow the work to be completed.
The cost to taxpayer of restoring the Palace of Westminster, which has not been refurbished since repairs to war damage in the 1940s, has been estimated at more than 3 billion pounds.
Referring to the 1834 blaze which destroyed almost all of the old palace of Westminster, he said, "It would be a huge pity if we decided that by the time we had reached the 200th anniversary of the vast fire which consumed the old parliament and brought this one in to being, we had to abandon this site and look elsewhere in order to serve the public interest properly."
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The Palace of Westminster - containing the House of Commons and House of Lords - is a Grade I-listed building much of which dates back to the 1840s and 1850s.
Much of it has never been renovated, and the heating, water, draining and electrical systems are described as "extremely antiquated".
A study in 2012 concluded "irreversible damage" would be done without extensive renovation work. Among the options put forward to carry out the work was a temporary closure, with MPs and peers meeting in an alternative venue.
"It will require bold and imaginative managerial leadership to ensure that we are a Parliament fit for purpose and that this Victorian legacy can be rendered practical for contemporary representation," he said.
The present building has had no general renovation since repairs of wartime damage were carried out between 1945 and 1950.