The files include sketches of UFOs drawn by witnesses
A former head of the armed forces told the defence secretary a UFO claim known as Britain's Roswell could be a "banana skin", newly released files show.
In 1985 Lord Hill-Norton wrote to Michael Heseltine about the "Rendlesham incident" in 1980, when US airmen in Suffolk said they saw strange lights.
He said an unauthorised aircraft may have entered and left UK airspace.
In 2003, an ex-US security policeman said he and another airman had shone patrol car lights as a prank.
The case is among the latest MoD files on UFOs released by the National Archives.
'Puzzling and disquieting'
The "Rendlesham incident" involved American airmen from RAF Woodbridge who reported seeing mysterious lights.
Witnesses said a UFO was transmitting blue pulsating lights and sending nearby farm animals into a "frenzy".
Lord Hill-Norton's letter said either a craft had entered UK airspace with impunity or US airmen were capable of a "serious misperception".
But in 2003, ex-US security policeman Kevin Conde admitted that he and another airman had shone patrol car lights through the trees and made noises on the loudspeaker as a prank.
But in 1985, Lord Hill-Norton - a former chief of the defence staff and First Sea Lord - wrote to Mr Heseltine, the then-defence secretary, to express his feelings about the event.
In his letter, Lord Hill-Norton said he rejected the official MoD line that the case was of "no defence interest", adding that it displayed "puzzling and disquieting features which have never been satisfactorily explained by your department".
He said it was either the case that a piloted craft had entered and left UK airspace with "complete impunity" or "a sizeable number of USAF personnel at an important base in British territory are capable of serious misperception".
Lord Hill-Norton added: "There seems to be a head of steam building up on this matter, and I can see a potential 'banana skin' [a political embarrassment] looming."
The "Roswell incident" refers to the belief among UFO watchers that in 1947 a flying saucer with aliens on board landed outside the New Mexico town of Roswell and that an elaborate cover-up by the authorities followed.
The National Archives release is part of a three-year project by the MoD and the National Archives to release files related to UFOs on the National Archives website.
Other incidents recorded in the latest batch of documents, which cover the years 1981 to 1996, include:
• Two men from Staffordshire who told police that, as they returned home from an evening out in 1995, an alien appeared under a hovering UFO hoping to take them away
• More than 30 sightings of bright lights over central England during a six-hour period in 1993, which led to the assistant chief of defence staff being briefed - and turned out to be caused by a Russian rocket re-entering the atmosphere
• Several sightings in Bonnybridge, central Scotland, which became the UK's UFO hotspot during the 1990s
• A UFO which was seen over the jazz stage at the Glastonbury Festival in June 1994. The two female witnesses reported that they turned to the people next to them to verify what they had seen but "they didn't look hard enough or take it seriously"
I think it's clear that people see what they expect to see
Dr David Clarke
Sheffield Hallam University
It is also revealed that UFO sightings leapt from 117 in 1995 to 609 in 1996 - the year that Will Smith's alien invader blockbuster Independence Day was released and alien conspiracy series The X Files was at the height of its popularity with UK audiences.
Dr David Clarke, a UFO expert and journalism lecturer at Sheffield Hallam University, said it was significant that one of the biggest years for reports previously had been 1978, which saw 750 - at the same time that Steven Spielberg's blockbuster Close Encounters of the Third Kind was released.
He added: "Obviously, films and TV programmes raise awareness of UFOs and it's fascinating to see how that appears to lead more people to report what they see.
"In the 1950s you have UFOs with flashing dials like in the b-movies of the time, and the aliens tend to come from Venus and Mars - that stops from the late '60s when we find out how inhospitable these places are.
"From the mid-1980s you start to see triangular-shaped objects - this is the era of US stealth aircraft. I think it's clear that people see what they expect to see."