The Education Secretary, Charles Clarke, has ruled against admissions policies followed by some Catholic secondary schools.
The council said the rules were unfair
He has reprimanded four schools in Essex in a ruling which has implications for other schools.
The schools only took pupils if they had put a Catholic school as their first choice.
Mr Clarke said as a test of a family's commitment to Catholicism, this was unfair.
He ruled on the issue after complaints made by Essex County Council were referred to him.
The council says parents and children were being discriminated against, because they did not have the same choices as other parents in Essex.
There are grammar schools in the areas concerned and some families wanted their children to sit the eleven-plus and apply for a Catholic school as well.
The council said the admissions' policies followed by the schools in question denied parents that right.
In his ruling, Charles Clarke said:"This test of Catholicism is not a fair one and may act to fetter parental discretion by influencing the choices a parent may make by disadvantaging them if they do not put a Catholic school as their first preference."
The schools see the selection of only Catholic schools as a sign of a family's commitment to Catholic education.
The dioceses of Brentwood, Southwark and Westminster recommend the system of "first preference" in guidance to their local schools.
Father George Stokes, director of education for the Brentwood diocese, told the Times Educational Supplement: "We are in the business of providing Catholic schools for those who want a Catholic education, not parents who could not get their children into a local grammar school and are using us as a safety net.
"This will set a dangerous precedent."
'Clear, fair and objective'
Oona Stannard, director of the Catholic Education Service (CES) said it should be left to diocesan trustees and the governing bodies of individual schools to determine and fairly apply their admissions criteria.
"The CES supports the right of governing bodies to seek evidence of commitment to a Catholic education as part of its admissions criteria in cases of oversubscription," she said.
A spokeswoman for the Department of Education and Skills said: "The Secretary of State has considered these cases on their merits in the light of the evidence before him.
"He is concerned to ensure that admission arrangements are clear, fair and objective and that parents understand the oversubscription criteria."