The Culture, Media and Sport Select Committee's hearing on the future of the corporation was told that local newspapers often found their stories repeated on BBC outlets without attribution.
The president of the Newspaper Society, Adrian Jeakings, told MPs that "unconstrained commercial expenditure by the BBC could, if taken to its limit, wipe out the local press".
He said: "If we could find a mechanism whereby we would be appropriately rewarded for creating content for them and sharing it with them then we'd be very interested. Just stealing it though, we're not keen on".
Asked by committee chairman John Whittingdale if that would be "indirect state funding of local newspapers", he said it would not.
Mr Jeakings said: "The state would not be determining what content was created or indeed controlling what we said.
"They would be paying for what is supposed to be an independent broadcast medium to source content of relevance to its audience.
"It would be far more attractive to do it that way than any form of state subsidy for what we used to call the regional press."
Last November, Home Secretary Theresa May warned the BBC's dominant position on the internet was destroying local newspapers.
She told the Society of Editors' annual conference in London that the "might of the BBC" could ultimately impact on "local democracy". She said: "If the BBC can, as they do, provide all the locally significant news, what is left to motivate the local reader to buy a paper?"
The committee also heard from senior executives from commercial radio.
Will Harding, from Global Radio, which owns Classic FM, said the BBC should be a pioneering organisation and not follow the lead of commercial broadcasters.
He said Radio 3 took presenters from Classic FM and copied its approach, telling MPs: "This is not the BBC leading the way, this is the BBC doing the reverse - aping what the commercial sector does".
A BBC spokesman said: "We note the remarks made by representatives of the local and regional media in today's select committee."
He added: "We have a regular dialogue with them and are actively exploring potential improvements to the way our local websites could increase still further the flow of traffic to local newspaper sites."