The form of the condition, known as Van der Woude syndrome, can cause severe facial disfigurements in babies.
The researchers discovered the gene - known as Interferon Regulatory Factor 6 (IRF6) - by examining information generated from the Human Genome Project.
Much of the work was based on an analysis of samples from a set of twins in Brazil, where, highly unusually, one boy was born with Van der Woude syndrome, and the other without.
In the long-term, it could lead to better understanding of why and how cleft lip and palate occurs, and could lead to treatments during pregnancy that might prevent the development of the condition.
Important advance
Researcher Professor Michael Dixon, of the University of Manchester, said: "This research is of significant global interest. Every 11 minutes a child is born somewhere in the world with a cleft lip and palate.
"This gene is certainly one of the most important to be identified.
'It will be at least 10 years before any treatments are available, but in the short-term, families affected by Van der Woude will have a genetic test available that will help them prepare in advance for having a child with this syndrome."
Professor Dixon said the next stage would be to examine how the gene interacts with others involved in face and mouth development.
Cleft lip and palate causes either an opening between the mouth and the nose, or a small gap in parts of the mouth. In some cases the baby is born with both.
Cases can vary in severity, but it's not known why they occur. There is currently, therefore, no way to prevent babies developing cleft palate.
'I want to be a dad'
Van der Woude syndrome (VDW) accounts for about 2% of all cleft lip and palate cases, which means it affects some 2,000 individuals in the UK.
Geoff Murray, from Stockport, Cheshire, has lived with VDW for almost 41 years.
He said: "I was born at home with no top lip, soft or hard palate and my nose was flattened to my face. I had the first operation of many when I was 11 weeks old.
"Although I would love a child, my condition has prevented me from considering fatherhood.
"Research is vital to further understand how the syndrome is caused and to potentially discover the means by which these problems could be eradicated."
The Birth Defects Foundation reported in March 2002 that there has been a rise of 50% over the last five years in birth defects including cleft lip and palate.
The research, part funded by the charity Action Research, is published in the journal Nature Genetics.