The report published by multi-faith group, the Accord Coalition for Inclusive Education found just one in eight dioceses advise against the practise, despite the Church claiming it doesn't discriminate.
Rabbi Dr Jonathan Romain from the Accord Coalition told Premier he's very in much in favour of faith but not faith schools that "segregate into religious silos".
He added: "I don't think it's very healthy for the children or the society at large.
"There is no national guidance by the Church of England... they've said 'we're doing it on a local basis... and each locality sorts out its own religious policy'.
"We contacted all 40 education boards and all 40 replied... and only five out of the 40 advise the schools not to select and to be positively inclusive."
The report calls for national Church authorities to "practice what it preaches" and issue new guidance that makes clear where authority over setting faith based admissions lies.
Rev Stephen Terry campaigns for all Church of England schools to be open and accessible to children and families from other backgrounds.
He said: "To select on grounds of faith is discriminatory and validates a wider culture that says it is okay for state funded schools to segregate children by this means.
"To do so threatens the reputation of the Church, and is seen by many, inside and outside the Church as potentially hindering the growth of integration and cohesion in our society."
However, the Church of England has strongly denied the accusations and maintained that it values the diversity in its schools.
It said schools' admissions policies set at a local level so that they can take into account the specific needs of their communities.
It added that the admissions of sixty per cent of Church schools (Voluntary Controlled schools) are handled by the local authority and there are no religious affiliation admissions criteria.
In a statement to Premier, Nigel Genders, Chief Executive Officer for the Church of England said: "The findings of the Accord's research do not provide an accurate picture of admissions to or the diverse make-up of Church schools.
"We do not recognise their description of the admissions landscape or the conclusions of the report.
"Those schools that do give some priority to Christian children do so in areas where competition for places is acute and often providing places purely on distance from the school would mean that only the wealthiest, who can afford to move house nearby, can access the best schools."
Listen to Rabbi Dr Jonathan Romain speaking with Premier's Tola Mbakwe here:
