School choice in Sweden, a model for Tony Blair's reforms, has reinforced social and racial segregation, it said.
A report by Sweden's National Agency for Education found that, although allowing families to choose schools was popular with parents, it was not cost-effective and made life harder for schools in difficult circumstances.
In his foreword to the white paper the Prime Minister said:
"There is increasing international evidence that school choice systems can maintain high levels of equity and improve standards.
"Swedish parents can choose an alternative school to their local one, including a diverse range of state-funded independent schools."
But evidence of problems with the Swedish secondary system, originally published in 2003, was presented by the National Union of Teachers to MPs on the education select committee inquiry into the white paper.
The Swedish report warned that parallel school systems in which the middle class are favoured may lead to an overall improvement in results but reduce equality.
"We cannot content ourselves with a school system which, while much improved, is not universally good," the report said.
The white paper proposes new trust schools, which can be set up by business, parents, faith groups or the voluntary sector, in an effort to increase choice of schools.
Failing schools will be be given 12 months to improve or be closed.
Steve Sinnott, the NUT general secretary, said: "This is a smoking gun that will confirm the fears of many MPs. The Prime Minister has claimed that choice will benefit every family. What this shows is that for a significant minority of children in Sweden, school choice has left them worse off."
He said the negative effects of segregation on disadvantaged children were likely to be greater in England than in Sweden because the UK spends less on public services and has a less generous welfare safety net.
Writing in this week's TES, Mary Bousted, general secretary of the Association of Teachers and Lecturers, also urged Labour backbenchers to rebel against trust schools.
She said: "What incentive will these schools have to take their fair share of the poorest, most disadvantaged children when the school's success will be judged on its place in the league tables?"
Don't trust these schools, Opinion 21