The Archbishop of Canterbury has spoken out in favour of Muslims and people of other religions setting up their own schools.
Dr Rowan Williams said faith schools were "nothing to apologise for" and that they had fallen out of favour following the New York terror attacks.
Muslims should be allowed to set up their own schools.
The alternative, he said, was that people of different religions would become "more isolated and ghettoised".
Private Islamic schools have existed in Britain for years and the first state-funded ones are now opening.
Dr Williams told the Association of Anglican Secondary School Heads annual conference in Exeter that the "good following wind" for faith schools that existed until 11 September 2001 had changed.
"A good many whose support for faith-based education had always been a bit grudging were understandably alarmed by a summer which saw racial violence in northern cities and the disgraceful incidents around Holy Cross School in Northern Ireland.
"And then, two years ago today, many things changed - it was suddenly a good deal easier to associate religious conviction with terror and bigotry."
He said people had been reminded of what a colossally significant role religion played in the lives of millions and that this should be recognised.
If schools tried to ignore Muslims' religious beliefs "the message given could be destructive", he said.
The Archbishop said some of those involved in education sought to create a system which was morally neutral - but this was impossible.
"If you think you are being neutral about the moral or spiritual ethos of a school, you are in fact generating an ethos of individualism, functionalism and ultimately fragmentation," he said.