A House of Commons select committee reported that parents often chose schools which have a high proportion of pupils from their own ethnic backgrounds because of "ignorance and fear of other cultures".
The select committee recommended that the Government should refuse any new faith schools unless they could prove that they were committed to multiculturalism.
The Office of the Deputy Prime Minister select committee launched its investigation after the race riots in Oldham, Bradford and Burnley in 2001.
The committee heard evidence from headteachers at a range of schools in the three towns, some of which draw all their pupils from one ethnic group.
"There are many schools whose students do not reflect the range of cultural groups in their locality and so do not help to promote social cohesion," the report said.
"This is a result of parental choice, the quality of some schools and the growth of faith schools."
Parents often have misconceptions about multicultural schools, the committee said, believing that they performed worse than schools which attracted pupils from a single ethnic background.
The MPs said that single-faith schools "tended not to see their role in promoting social inclusion".
Evidence from Northern Ireland suggested that they were a force for segregation.
As well as recommending limits on new faith schools, the committee also proposed that:
* schools, councils and the Government should make multicultural schools more attractive to parents by promoting their results and the "richness" they can offer.
* local authorities should take extra care about where they build new schools so they attract pupils from a range of backgrounds.
* faith schools should be given special guidance on how they can contribute to social inclusion.
The report's comments about faith schools angered the Church of England and the Catholic Education Service which say they are committed to multiculturalism.
Oona Stannard, CES chief executive, said: "The inaccuracy of the statements is extraordinary and deeply worrying at a time when we should all be taking our responsibilities to promote harmony seriously."
Canon John Hall, chief education officer for the Church of England, said the criticism was "tentative and based on inadequate evidence".
He added: "They quote the Northern Ireland experience, which is very different from that in England. The Church of England is strongly committed to promoting social inclusion."
Social Inclusion: sixth report, available at www.parliament.uk