Business journalist James Hipwell said voicemail interception was an everyday occurrence at Britain's Daily Mirror, where he worked in the late 1990s.
Hipwell said while he had no direct evidence that Morgan, the Daily Mirror editor at the time, was involved in the practice, he said it was impossible to imagine that Morgan had been kept in the dark. He said these comments to a British inquiry into media ethics.
"Nothing happened at the newspaper without him knowing," Hipwell testified, speaking a day after Morgan was grilled Tuesday in a tense, nationally televised hearing before the inquiry.
Before his U.S. television career as a CNN celebrity interviewer, Morgan ran two British tabloids - Murdoch's now-shuttered News of the World, which has been at the center of the U.K. phone hacking scandal, and the Daily Mirror, which is not connected to the Murdoch empire, where he stayed for nearly 10 years.
Both Hipwell and Morgan were investigated as part of an inquiry into market manipulation, after it became known that Morgan had made a quick profit of thousands of pounds (dollars) by buying shares that were promoted in the next day's paper.
While Morgan was cleared of wrongdoing, Hipwell and another tipster were convicted in 2005. Hipwell expressed remorse over his role, but said he always believed his former boss had been equally as guilty as he was.
"I can understand why people think that I have an ax to grind against him," Hipwell told the inquiry.
Hipwell described phone hacking as a "standard journalistic tool for gathering information."
Tuesday, Morgan said that a tabloid editor could only monitor about 5 percent of his journalists' work. Hipwell challenged this assertion, saying he often saw Morgan inspecting reporters' computer screens or working late into the night to tweak headlines.
Morgan "stamped his authority on every single page," Hipwell said. "The newspaper was built around the cult of Piers."
Morgan has already dismissed Hipwell's claims as the "unsubstantiated allegations of a liar and convicted criminal."
Testimony to the inquiry is given under oath, meaning speakers could be subject to criminal proceedings if found to have violated any British laws.
The Associated Press contributed to this report.