The Catholic Church is reluctant to invest in free schools and academies because of the requirement that they limit the number of Catholic children they take in, Tory MP Mark Hoban has said.
Under the current rules, a Catholic free school needs to take half its student body from other religious backgrounds if it is oversubscribed.
During a debate in Parliament, Mr Hoban pointed out that in the UK there are currently 243 Catholic academies, but that removing the cap would encourage more.
He claimed senior figures within the Catholic Church had said too many Catholic free schools felt they would lose their religious focus if over half the student body was non-Catholic.
"The faith-based admissions cap is a disincentive to Catholic Church and separate faith schools as it dilutes their ethos." He said
"We would have a richer and more diverse set of free schools and academies if the cap was removed.
"It would give more parents the chance to give their children the education and the values that they support."
Speaking about the necessity of removing the cap, Mr Hoban said "There is something very different about a Catholic school and its values. There are aspects of school life which are bound up in the sacramental life of the school - the participation in mass, a set of shared values, and the reference points that relate to the church and its teaching.
"It is hard to see how you can maintain that shared set of values and ethos if half the pupils are unable to relate to the practice of the Catholic faith."
Education Minister Liz Truss however defended the cap.
Speaking in the Times Education Supplement, she said: "If the government funds new faith-school provision, it is right that a proportion of the places be available to the whole community, including those of other faiths and none.
"I acknowledge... that the Catholic sector has objections to our policy on admissions to faith-free schools. I know that the Catholic Education Service (CES) has been in discussion with department officials.
"We remain committed to continuing our engagement with the CES, although I point out that we have no intention of changing or removing the 50 per cent limit."
Speaking on the matter in 2012, Michael Gove had said there was "no reason" why a new school with only 50 per cent Catholic students "shouldn't have a wholly Catholic ethos".
"Traditionally, Catholic schools have been concentrated in certain parts of the country. But Catholic parents who want a Catholic education for their children now have a way of providing it. Free schools are a way of increasing capacity, not limiting it," he said.
Speaking to Christian today about the ongoing situation, deputy director of the Catholic Education Service, Greg Pope said "This is an issue of very serious concern to the Catholic Church.
"We're hoping the government will think again about what is essentially an anomoly, whereby Government policy limits faith based admissions, but only in free schools, nowhere else in the education system.
"It broadly prevents the catholic church from opening free schools."
Speaking on the question of whether or not there would definitely be more schools if the cap were removed, Mr Pope said "While there isn't an enormous demand for Catholic Free Schools, it might be one avenue we'd consider.
"This artifical cap on admissions prevents us from doing so."