Cardinal Cormac Murphy-O'Connor has denied trying to blackmail ministers over laws on adoption by gay couples.
The cardinal said Catholic adoption agencies would have to close
He said: "I'm not blackmailing anybody. I am just saying to the government the possible consequences of carrying through these particular regulations."
The head of the Catholic Church in England and Wales says, if bound by the laws, his adoption agencies will close.
Tony Blair is trying to find a way to address "the different concerns" of Catholics and gay rights groups.
The prime minister has yet to make a decision on the row, his official spokesman has said.
Cardinal Murphy-O'Connor wrote to Cabinet ministers saying church teaching prevented its agencies placing children with homosexuals.
He said the closure of seven agencies would represent a wholly avoidable "tragedy".
The row is said to have split the Cabinet - Communities Secretary Ruth Kelly, who is Catholic, was reported to be pushing for an exemption.
But the Lord Chancellor, Lord Falconer, told the BBC if society takes the view it does not discriminate against homosexuals, people could not be given exclusions on the grounds of their religion.
Labour MP Angela Eagle and Lib Dem MP Evan Harris have both suggested the cardinal's comments were akin to blackmail.
Dr Harris said: "It is rather sordid that the Catholic leadership should seek to try and blackmail Parliament and government by threatening to close down its valuable work in adoption and other areas, particularly by using vulnerable groups like children in care to fight its ideological battle."
The Catholic Church wants to continue its policy of referring gay couples to other adoption agencies.
But this could fall foul of the Equality Act, due to come into effect in England, Wales and Scotland in April.
'Respect and sympathy'
It outlaws discrimination in the provision of goods, facilities and services on the basis of sexual orientation.
It says if they are not granted an exemption, local authorities would no longer be able to use Catholic agencies, and they would not be financially viable.
Cardinal Murphy-O'Connor told the BBC the Catholic Church was not discriminating against homosexuals and was bound by its teaching to treat them with "respect and sympathy".
Ruth Kelly was reportedly considering an opt out for Catholic agencies
"At the same time, with regard to homosexual couples, I think we would be obliged to say there are other ways that don't discriminate, other agencies who would be able to consider you for adoption."
He added: "It seems to me there's no need for the government to oblige us to act against our consciences, or to oblige local authorities to suspend the partial funding of our agencies, because it is a collaboration between the Catholic Church and the local authorities."
Tony Blair has yet to decide whether to exempt the Catholic Church from new laws on adoption by gay couples.
The prime minister is trying to find a solution to the adoption row that "addresses the different concerns" of the Catholic Church and gay rights groups, his spokesman has said.
"He's looking for a way through that recognises and tries to address the different concerns on both sides. There is no point pretending that there are simple answers to these questions. There aren't."