The Government will consider scrapping the blasphemy laws after consultation with the Church of England, Downing Street said.
Prime Minister Gordon Brown's spokesman said ministers may table amendments to the Criminal Justice and Immigration Bill in the House of Lords.
MPs are due to debate the measure in the Commons on Wednesday and Liberal Democrat MP Evan Harris has tabled his own amendment to scrap the ancient law designed to protect Christianity and the Church of England from attack.
Mr Brown's spokesman said: "We do believe it is necessary to consult with the churches, particularly the Anglican church, before coming to a final decision, and that's what we are doing.
"Subject to that, we will consider moving amendments in the House of Lords."
The move comes after leading figures, including the former Archbishop of Canterbury Lord Carey, wrote to The Daily Telegraph on Tuesday, urging that the blasphemy law should be repealed.
The letter argued that the law is discriminatory in that it only covers attacks on Christianity and Church of England tenets.
They said the law "serves no useful purpose" and offers Christian activists a means to intimidate broadcasters, publishers and performers.
The campaign follows the diplomatic row over the jailing of British teacher Gillian Gibbons for blasphemy in Sudan over naming a teddy bear Mohammed.
She was later pardoned after diplomatic protests from Britain.
