Students at Balliol sparked controversy over their decision last week to bar the CU, in order that the event to welcome first year students could be a "safe and secular space". The decision, taken by a Balliol College committee, was reversed. Religious groups will be allowed to participate in future fairs.
The Church of England's chief education officer, Rev Nigel Genders, said: "Freedom of religion and belief is a fundamental principle that underpins our country and its great institutions and universities.
"Christian Unions represent some of the largest student-led organisations in many universities across the country and to exclude them in this way is to misunderstand the nature of debate and dialogue and at odds with the kind of society we are all seeking to promote."
The Universities and Colleges Christian Fellowship (UCCF) say the situation was amicably resolved and that "Most Student Unions are fair-minded and enjoy a good relationship with the CU in their university. Director of UCCF, Rev Richard Cunningham said: "We are however concerned that the current desire to provide safe spaces on campus does not infringe on the core liberties of freedom of speech and freedom of association which are surely foundational to the university experience and indeed to basic human flourishing."
A Christian Union spokeswoman said an incident of this kind is "a pretty rare experience" and has been "amicably resolved".
She continued: "Most student unions are fair-minded and enjoy a good relationship with the CU in their university.
Balliol College said it is pleased "that the students themselves have now resolved this matter."
It added: "Balliol is a tolerant, friendly college where students of all faiths and none are free to worship and express their beliefs openly."