Smoker Paul Kersey and wife Ella, from St Austell, were told they were not considered suitable to adopt by Cornwall's Adoption Service.
A letter suggests if Paul were to stop smoking, the case may be reconsidered.
The Adoption Service said the policy was in line with national guidance and a decision would not be based on the smoking issue alone.
Safety 'paramount'
Mr Kersey, 43, said he only smokes outside the house.
"I could understand if the social worker came round and there were butts and ashtrays everywhere," he said.
"But anyone who comes into our house will know there is no smoking in the house."
Other factors cited against adoption were that Merchant Navy captain Mr Kersey's work takes him away from home for six to eight weeks at a time and his wife, who he met in Turkmenistan, did not have English citizenship.
The couple, who have attempted through fertility treatment to have a baby, have now decided to try again.
But Mr Kersey said he refuses to give up smoking.
Health risks
"The safety of the child should be paramount, but I am concerned with the system," he said.
"If you can tick the boxes then you're fine, but this is another sign of a world gone politically-correct mad."
Cornwall's Adoption Service said in a statement: "Every individual case is considered on its own merits.
"The primary consideration is always the welfare and wellbeing of a child who may be placed for adoption.
"The service may not accept an application if it predicts the outcome of the application is not favourable."
It said that included instances where the health and lifestyle of the applicant may result in the child losing a parent through their childhood, for instance through a smoking-related disease.
It said: "Factors such as weight or smoking would not, by themselves, bar an applicant from adoption, but on medical advice the service would not place children under two with families who smoke because of the health risks to the child and potential health risk to the parent who smokes."
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