Government amendments will allow some faith schools to insist that their heads share their religious beliefs and others will be able to appoint support staff on the same basis.
Local authorities will be given a legal requirement to provide free transport to disadvantaged pupils who want to attend a secondary school according to their religious preference between two to 15 miles from their home.
The changes to the legislation came as Alan Johnson, the Education Secretary, attempted to smooth relations with religious representatives angry at his proposal to make a quarter of new state-funded faith school places open to pupils of other or no faith.
He called a summit of religious leaders and suggested that Ofsted inspectors should look at whether faith schools are improving community relations and check that pupils were taught about other faiths. The meeting failed to mollify the head of Catholic Education Service who has stepped up his campaign against the "ill thought out, unworkable" and "deeply insulting" quota proposal.
In a letter to the heads of all 2,248 Catholic schools in England and Wales, the Most Reverend Vincent Nichols, Archbishop of Birmingham, called on them to tell their MPs that Catholics are "outraged and offended" by its implications. "The Government is telling us that left to ourselves we are socially divisive," he wrote. "Nothing could be further from the truth."
The plan has also been criticised by senior Jewish and Muslim education figures. But Keith Porteus Wood, National Secular Society executive director, dismissed it as spin and gesture politics, which would amount to little in reality.
He is more concerned about amendments to the Education bill that have been accepted by the Lords on faith-school staffing. One will allow voluntary-aided faith schools in England, but not Wales, to give preference to support staff that share the school's religion. At the moment this only applies to teachers.
Lord Adonis, schools minister, said that after workforce reform it would be "perverse" if a faith school was discouraged from appointing pastoral assistants rather than qualified teachers because it could not make their religion a requirement.
Another amendment allows foundation and voluntary controlled faith schools to select new heads according to their ability to teach the school's religion. Mr Porteus Wood said: "A small and declining number of Christian staff will be pushed to the top of the job queue past better qualified and more able candidates."
The free school transport measure will apply to pupils eligible for free school meals or whose parents qualify for the maximum working tax credit.
Canon John Hall, the Church of England's head of education, said he had lobbied for the amendment because some local authorities had stopped subsidising transport to religious schools. He said the rule would also apply to disadvantaged secular pupils who needed to avoid attending a faith school.