The Baptist Union, the Church of Scotland, the Methodist Church and the United Reformed Church joined in urging ministers to re-think their approach, aspects of which they said "run counter to Christian teaching".
Lucy Zwolinska from the Joint Public Issues Team (JPIT), which represents the four churches, told Premier's Inspirational Breakfast: "It's about treating people decently.
"Like Jesus promises us life in abundance, we are called to see the good in everyone; when we deny people basic services, when we force them into destitution, we deny that in them."
Clampdowns on illegal immigrants seeking access to free healthcare or wanting to rent a property are among steps the Government has taken to encourage people residing unlawfully in the UK to leave, in recent years.
Other measures to boost the number of so-called "self-deportations" include threatening employers with hefty fines - and even prison sentences - if they do not check the immigration status of their workers.
It has also become harder for illegal immigrants to obtain a driver's license or open a bank account.
Insisting that the "hostile environment" policy has gone too far, Lucy Zwolinska said: "This means that it deliberately inflicts destitution on people.
"Now, this in itself - as churches - we think is inappropriate; destitution should never be used as a policy tool."
The JPIT fear the policy has affectively turned bank staff, health workers and landlords into "amateur border guards" who may sometimes unfairly single out people who "do not look or sound 'British'".
In a statement, leaders said: "Due process, justice and the proper implementation of immigration policies should not require us to live in suspicion of our neighbour.
"The hostile environment spins a web of distrust and encourages suspicion."
Premier has contacted the Home Office for a comment.
Click here to listen to Premier's Cara Bentley speaking with Lucy Zwolinska from the Joint Public Issues Team:
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