According to the Daily Mail Diesel and a seven-year-old Belgian Shepherd were killed during reckless shooting that wounded innocent neighbours and threatened at least five other policemen.
They animals were hit by rounds of Brenneke bullets during the attack on a house in the Paris suburb of Saint-Denis in November last year.
The raid led to the deaths of at least two terrorists who had taken part in the attacks which killed 130 people.
The revelations are seen as a huge embarrassment for the elite RAID police group.
Diesel was due to receive a posthumous Dickin medal - Britain's animal equivalent of the Victoria Cross.
Jean-Michael Fauvergue, who commanded the operation, confirmed Diesel was killed by Brennekes, the ammunition used by his force.
He admitted "saturation fire" was used to kill Abdelhamid Abaaoud, the suspected leader of the Paris terrorists, and fellow attacker Chakib Akrouh.
Abaaouud's female cousin was also killed as she tried to give herself up. Her surviving family is launching legal proceedings for her murder and two neighbours hit by bullets are also consulting lawyers.
Five RAID officers also reported friendly fire damage to their equipment.