Frances Haugen, a 37-year-old former product manager turned whistleblower, heavily criticised the company at a hearing on Capitol Hill.
Facebook has faced growing scrutiny and increasing calls for its regulation.
Founder Mark Zuckerberg hit back, saying recent coverage painted a "false picture" of the company.
In a letter to staff, he said many of the claims "don't make any sense", pointing to their efforts in fighting harmful content, establishing transparency and creating "an industry-leading research program to under these important issues".
"We care deeply about issues like safety, well-being and mental health," he said in the letter, made public on his Facebook page. "It's difficult to see coverage that misrepresents our work and our motives."
Facebook is the world's most popular social media site. The company says it has 2.7 billion monthly active users. Hundreds of millions of people also use the company's other products, including WhatsApp and Instagram.
But it has been criticised for everything from failing to protect users' privacy to not doing enough to halt the spread of disinformation.
Ms Haugen told CBS News on Sunday that she had shared a number of internal Facebook documents with the Wall Street Journal in recent weeks.
Using the documents, the WSJ reported that research carried out by Instagram showed the app could harm girls' mental health.
This was a theme Ms Haugen continued during her testimony on Tuesday. "The company's leadership knows how to make Facebook and Instagram safer, but won't make the necessary changes because they have put their astronomical profits before people," she said.
She criticised Mark Zuckerberg for having wide-ranging control, saying that there is "no one currently holding Mark accountable but himself."
And she praised the massive outage of Facebook services on Monday, which affected users around the world.
"Yesterday we saw Facebook taken off the internet," she said. "I don't know why it went down, but I know that for more than five hours, Facebook wasn't used to deepen divides, destabilise democracies and make young girls and women feel bad about their bodies."
The answer, she told senators, was congressional oversight. "We must act now," she said.
Mr Zuckerberg, in his letter, said the research into Instagram had been mischaracterised and that many young people had positive experiences of using the platform. But he said, "it's very important to me that everything we build is safe and good for kids".
On Monday's outage, he said the deeper concern was not "how many people switch to competitive services or how much money we lose, but what it means for the people who rely on our services to communicate with loved ones, run their businesses, or support their communities".
Both Republican and Democratic senators on Tuesday were united in the need for change at the company - a rare topic of agreement between the two political parties.
"The damage to self-interest and self-worth inflicted by Facebook today will haunt a generation," Democratic Senator Richard Blumenthal said.
"Big Tech now faces the Big Tobacco jaw-dropping moment of truth," he added, a reference to how tobacco firms hid the harmful effects of their products.
Fellow Republican Dan Sullivan said the world would look back and ask "What the hell were we thinking?" in light of the revelations about Facebook's impact on children.
In a statement issued after the hearing, Facebook said it did not agree with Ms Haugen's "characterisation of the many issues she testified about". But it did agree that "it's time to begin to create standard rules for the internet."
"It's been 25 years since the rules for the internet have been updated, and instead of expecting the industry to make societal decisions that belong to legislators, it is time for Congress to act," the statement read. - BBC