The team unearthed the 3.5 metre circular structure next to an ancient lake at Star Carr, near Scarborough.

They are currently excavating a large wooden platform next to the lake, made of timbers which have been split and hewn.

This platform is the earliest known evidence of carpentry in Europe.

The house itself predates what was previously Britain's oldest known dwelling at Howick, Northumberland, by at least 500 years.

The wooden dwelling at Star Carr, which was first excavated by the team two years ago, had post holes around a central hollow which would have been filled with organic matter such as reeds, and possibly a fireplace.

"This exciting discovery marries world-class research with the lives of our ancestors," said David Willetts, Universities and Science Minister.

"It brings out the similarities and differences between modern life and the ancient past in a fascinating way, and will change our perceptions for ever."

"I congratulate the research team and look forward to their future discoveries."

The site was inhabited by hunter gatherers from just after the last ice age, for a period of between 200 and 500 years.

They would have migrated from an area now under the North Sea, hunting animals including deer, wild boar, elk and enormous wild cattle known as auroch.

Though they did not cultivate the land, the inhabitants did burn part of the landscape to encourage animals to eat shoots and they also kept domesticated dogs.

"This is a sensational discovery and tells us so much about the people who lived at this time," said Dr Nicky Milner of the University of York.

"From this excavation, we gain a vivid picture of how these people lived."

"For example, it looks like the house may have been rebuilt at various stages."

"It is also likely there was more than one house and lots of people lived here."

"The platform is made of hewn and split timbers -- the earliest evidence of this type of carpentry in Europe."

"And the artefacts of antler, particularly the antler head-dresses, are intriguing as they suggest ritual activities."

The discoveries mean we could have to re-think our assumptions about how people lived in the Stone Age.

"This changes our ideas of the lives of the first settlers to move back into Britain after the end of the last Ice Age," said Dr Chantal Conneller of the University of Manchester.

"We used to think they moved around a lot and left little evidence."

"Now we know they built large structures and were very attached to particular places in the landscape."