Henry Waxman, chairman of the House of Representatives' Government Reform and Oversight Committee, accused President George W. Bush's administration of inventing sensational details and stories about Tillman's death in Afghanistan, and Lynch's rescue in Iraq.
Tillman was killed in April 2004 after American soldiers behind him emerged from an ambush in a canyon, saw him, panicked and fired.
The army initially said he was killed by enemy fire when he led his team to help ambushed troops, despite dozens of soldiers knowing he had been killed by so-called "friendly fire".
It was five weeks before his family was told the truth, a delay the army has blamed on procedural mistakes. Tillman's death received worldwide attention because he had walked away from a huge million dollar contract with the National Football League's Arizona Cardinals to enlist in the US army after the September 11, 2001 attacks in the US.
Tillman's brother Kevin was in a convoy behind his brother when the incident happened, but did not see the incident. A soldier who was with Tillman when he was killed told the committee on Tuesday he was told specifically not to tell Kevin that his brother's death was due to "friendly fire".
Specialist Bryan O'Neal said he was "ordered not to tell" Kevin by Lieutenant-Colonel Jeff Bailey, the battalion commander who oversaw Tillman's platoon. Kevin Tillman accused the US military of deliberately lying about his brother's death.
"This freshly manufactured narrative shifted the focus of the grotesque torture at Abu Ghraib and a downward spiral of an illegal act of aggression, to a great American that died a hero's death," he said.
"A terrible tragedy that might have further undermined support for the war in Iraq was transformed into an inspirational message that served instead to support the nation's foreign policy wars in Iraq and Afghanistan."
He said the decision to posthumously award Tillman a Silver Star for valour in battle had further embellished the deception. The Pentagon last month called for action against a three-star general and eight other army officers for their handling of Tillman's death.
Thomas Gimble, the acting army inspector-general, said in a report that the military "chain of command" had made "critical errors" in the days following Tillman's death. Waxman also accused the government of inventing sensational details about the 2003 rescue of Lynch in Iraq.
Lynch, then an army private, was badly injured when her convoy was ambushed in Iraq in 2003. The military says she fought off the enemy until she was captured. But Lynch says she exhibited no particular acts of heroism and began to pray after her weapon jammed. She was subsequently rescued by American troops from an Iraqi hospital.
"I have repeatedly said when asked, that if the stories about me helped inspire our troops and rally a nation, then perhaps there was some good," Lynch said.
"However, I'm still confused as to why they chose to lie and tried to make me a legend when the real heroics of my fellow soldiers that day were legendary."
Reports emerged following her rescue hat she had received several gunshot wounds, but Dr Gene Bolles, the neurosurgeon who treated Lynch in Germany after she was rescued in Iraq, testified that after examining her, he found no evidence of any gunshot wound.
Lynch and the Tillman family say the military bamboozled them, and the American people. Now the American Congress, controlled by President Bush's Democrat opponents, is trying to find out why.