UK unemployment rose by 114,000 between June and August to 2.57 million, a 17-year high, according to official figures.
The Office for National Statistics (ONS) said the unemployment rate also increased to 8.1%.
The unemployment total for 16-24 year olds hit a record high of 991,000 in the quarter, a jobless rate of 21.3%.
The number of people out of work and claiming benefits rose 17,500 to 1.6 million in September.
Other figures showed a record cut in the number of part-time workers, down by 175,000, and there was also a record reduction of 74,000 in the number of over-65s in employment.
The Employment Secretary, Chris Grayling, said that what the UK was now seeing was "the impact of the international financial crisis".
He said although the UK was not in the euro, it was "not immune" to the problems currently being experienced in the eurozone and in countries such as Greece.
There have been criticisms of the government's deficit reduction programmes, with some analysts saying it was hampering economic growth.
The shadow work and pensions secretary, Liam Byrne, said the news marked "a day of judgment for the government".
"Today's figures are the clearest proof yet that the government's decision to cut too far and too fast is hurting and just not working.
Unemployment is soaring, and more young people are out of work than ever before."
ConfidenceUnemployment is soaring, and more young people are out of work than ever before."
The Bank of England recently said it would pump another £75bn into the economy through more quantitative easing (QE) to try to improve the business climate.
But Mr Grayling said the "important reason why we are pursuing deficit reduction" was to retain the confidence of commercial markets, and to encourage businesses to set up in the UK.
The TUC's general secretary Brendan Barber said: "These are terrible figures. The government's austerity measures have turned unemployment into a full-blown crisis - with job losses not seen since the darkest days of the recession.
"Worryingly, this is not simply the result of eurozone troubles. This unemployment crisis is state-sponsored and areas like the North East are paying a heavy price, with over one in 10 people out of work."
'Disaster'
The data drew a mixed reaction from economists.
Ross Walker, from RBS Financial Markets, said the picture was not altogether gloomy.
"The drop in total employment is bigger than people thought. But it is worth noting that it is almost entirely part-time," he said.
"So in the latest quarter, full-time employment - which to me is always the single most important indicator - was down just 2,000 and it's still up over the past year by about 124,000."
But Alan Clarke, of Scotia Capital, said the figures were a "disaster".
He added: "That (the data) shouldn't come as a surprise because the economy is growing at half the pace it needs to keep unemployment stable. That's not going to change anytime soon, so we should get used to numbers like this."
The chief economist at the Institute of Directors, Graeme Leach, said: "These are grim figures and are likely to get worse before they get better. But abandoning the deficit reduction plan will do the unemployed no favours.
"The hope is that QE2 will lift the money supply and economic activity, but the ongoing eurocrisis is pushing the UK towards a double-dip with increasing speed. All this is before the threat of contagion has actually materialised. We are sailing in stormy seas."
BBC
