According to the Ministry of Defence's own figures, up to 2000 members of the armed services are being diagnosed every year with a psychiatric condition after serving in Iraq or Afghanistan.
Ex service personnel, who fought in earlier campaigns stretching back to the Second World War, are also coming forward for treatment after psychological problems have emerged years, sometimes decades, later.
It has also emerged that up to seven service personnel have committed suicide either during or after active duty in Iraq.
A senior MoD official revealed the details of the size of the problem.
"We are facing an explosion of psychiatric problems not just from serving military personnel but also from those who served in campaigns dating all the way back to the Second World War. It is a huge problem and something which requires a cross-governmental solution," Telegraph quoted the official, as saying.
The official's comments were supported by Combat Stress, the ex-services mental welfare charity, which has seen an increase in the number of referrals of veterans rise by 53 per cent since 2005.
Robert Marsh, the director of fund raising for Combat Stress, said his organisation was working at full capacity.
"There is a strong possibility that we face being swamped by new veterans seeking our help. There has been a 53 per cent increase in the number of veterans seeking our help in just three years. Lord knows what we are going to be faced with in five or 10 years time. We need to develop more capacity for the future because we are already creaking," he said.