Churches, successful schools (see story below), and voluntary and private sector organisations will be brought in to manage and run schools in difficulties, under five or seven-year performance-related contracts.
But critics claim the evidence for church school success is mixed.
The Prime Minister, whose sons attend the Roman Catholic London Oratory, praised the ethos and academic success of church schools. He and David Blunkett said they wanted all schools to have faith schools' "sense of mission".
"It does seem to be a warm vote of confidence not just in church sector but other faith schools," said Canon John Hall, secretary for the Church of England's board of education.
Consultation by the Church of England on a review of its schools, chaired by Lord Dearing, ended this week. The Church has plans for 100 new secondaries, but is seeking ways to fund its ambitions.
Canon Hall said the Church would need to look carefully at the plan to offer outside organisations contracts to run schools, but believed that it offered a positive opportunity.
Other faith schools, many of them independent but seeking routes into the state sector like Al Hijrah in Birmingham, have wecomed the Green Paper's proposal to reduce the capital costs borne by voluntary-aided schools from 15 to 10 per cent.
Although nearly a quarter of the most successful secondaries are church-run, they are less dominant in the primary sector, says the Office for Standards in Education. Selection, even on religious grounds, is likely to attract well-behaved children from stable backgrounds, it says.
John Bangs, assistant general secretary of the National Union of Teachers, said: "The Green Paper is making completely unsubstantiated claims about church schools."
The National Secular Society questioned whether when the church is "heading for extinction" the state should be investing in faith schools that may restrict the admission and employment of pupils and staff.
Meanwhile, past attempts to encourage private-sector partnership do not seem to have put the Government off. Mr Blunkett's plans for city academies - with corporate sponsors - to replace failing urban schools owe much to the Tory technology colleges. The previous government had planned for 20 institutions, but a lack of sponsors meant only 15 were established.
Margaret Murray, head of the Confederation of British Industry's learning and skills group, said: "It's not for us to tell teachers their jobs, but I don't think any doors should be closed."
Local education authorities, absent from the list of those who should run schools under contract, have been offered pound;1.8m to pilot "innovative ways of working with the private sector and other partner organisations".