Education Secretary Alan Johnson has abandoned plans to force faith schools to accept more pupils from non-religious backgrounds after fierce protests from Catholics.
Mr Johnson announced last week that he wanted to give local councils the power to require new faith schools to accept up to a quarter of pupils from other faiths or none by introducing laws to force faith schools to act with an amendment to the Education and Inspection Bill.
The amendment would have enabled councils to require new faith schools to select up to 25% of their intake from pupils of other faith backgrounds or those with no religious beliefs.
But now he said a voluntary deal had now been reached with both the Catholic Church and the Church of England, meaning that his proposed new laws were no longer necessary.
Mr Johnson said: "I have listened carefully to colleagues on this issue and recognise that we all share the same goal for a more cohesive society where faith schools play an important part in building understanding and tolerance of other faiths and communities."
He said the legislation would not be appropriate, though school inspectors would get new powers to make sure faith schools promoted community cohesion.
"Over the last week I have had a series of meetings with faith groups and colleagues in the House and we have made considerable progress," he said.
"We have exchanged letters with the Catholic Church setting out an agreed way forward to ensure that up to 25% of places in new Catholic schools for pupils from other or no faith would be additional to the demand for faith places.
"The Church of England has already pledged to deliver the same for its new schools.
"As we now have the support of the two major faith organisations in the country for our proposed way forward, I do not feel the legislative route is necessary or appropriate and no longer propose to lay an amendment to the Education and Inspection Bill."
