The paper subsequently published a front-page apology and Express Newspapers paid the couple £550,000 in damages last year for untrue allegations about the McCanns involvement in their daughter's disappearance in 2007.
"I do not print stories which I believe to be untrue. That is not what I do," Hill told the House of Commons select committee investigating press standards, libel and privacy, on Tuesday morning.
Responding to a question about particular headlines which made accusations against the McCanns, Hill said he acted on information from the police and the 'British forensic science laboratory'.
"...[W]e had every reason to believe that it was a genuine line at that time. Absolutely," he said.
The Express' coverage relied on leaked reports from the Portuguese police, which were legally prohibited from giving official comments, to the country's media, said Hill.
"We did our best to check up on these things, but of course it wasn't very easy to do so (...) We always put the stories to Mr and Mrs McCann's PR team," he said.
The team managing media enquiries on behalf of Gerry and Kate McCann did not always respond to the paper's calls, after the couple had been named as suspects by the Portuguese police.
After the McCanns made complaints about the Express Newspapers group's coverage, including 38 headlines in the Daily Express, via their lawyers Carter-Ruck, the nature of British libel law prevented Hill from defending the case in court, he said.
The case was settled out of court, as he would not have been able to defend it in the name of 'public interest', as defined by British law, and it would have been 'unthinkable' to drag Mr and Mrs McCann through the courts, Hill said.
Public interest, in that 'very strict' sense, he said, 'means something that is of general concern to the well-being and safety - or whatever it is - of the public'.
"This was a matter which involved a family (...) This was not in the public interest, and could not be described as that," he added.
"[But] there was an insatiable clamour for information about what was going on; this was the question [Madeleine's location] everybody in the whole country (...) wanted to know.
"We were getting 10,000 messages a day, comments from people, nothing like this had ever been seen (...) It was quite clear to me this is what the readers wanted to read about it.
"[At] the time we had no reason to believe we were not telling the truth. You've got to understand this was the only show around at that time."
The Daily Express' coverage of the McCann case was not in 'isolation', added Hill, who said he was 'surprised' when the McCanns sued his paper 'only at that time'.
Hill said that he understood the McCanns had now also settled with two other newspaper groups, and one television station.
Suggestions that he should resign as editor over this case were 'ridiculous', he said: "If editors had to resign after every time a libel action was issued against them, there would be no newspaper editors."
Defending the current self-regulatory system for the UK press, Hill claimed that if the McCanns had complained via the PCC, he would have considered the paper's coverage very carefully.
Updated 08/05/09 with additional information from Hansard report.
Previous coverage of the committee from Journalism.co.uk:
- 'Paul Dacre: Statutory privacy law would have 'deleterious and chilling effect' on press freedom'
- 'UK law prevents truth-telling in journalism, Nick Davies tells parliamentary committee'
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