Dr Habgood, the second most senior figure in the Church of England, said at the North of England Education Conference in York: "The system is not working as it is. The Government should have another look at it in proper consultation with teachers.''
He acknowledged complaints from Christian groups that poor school worship had an anti-religious effect. He also understood why teachers who are not believers felt hypocritical about conducting religious assemblies. "It would probably be an advantage to have less worship but of better quality," he said.
Under the 1944 Education Act, schools have to hold a daily act of worship, but a survey showed more than eight out of 10 schools were breaking the law. Last year John Patten, former secretary of state for education, issued guidelines as part of a campaign to insist on more Christian worship in schools.
Dr Habgood said outside the conference, attended by teachers, academics and education administrators: "It is absolutely clear that schools do not create Christians and should not be expected to.
"Church schools have a rather different role and one would expect worship to be carried out with greater conviction.''
Schools had a duty to introduce all pupils to the language and experiences which would allow them to make sense of religion. Keeping religion out of schools was a great mistake.
Children should occasionally experience a full act of religious worship so they could get a sense of what religion was about.
Dr Habgood would not say what should replace the present arrangements and refused to be pinned down on whether daily worship in schools should be abolished.
David Hart, general secretary of the National Association of Head Teachers, said schools were having increasing difficulty in delivering a daily act of worship. "Our own policy for some time has been that schools should not be required to undertake more than one act of collective worship a week." The change would make worship more meaningful and closer to the realities of life, he added.
Colin Hart, director of the Evangelical Christian Institute, said he was very disappointed in the Archbishop's remarks. "It is naive to assume that reducing the number of days on which worship is required will lead to an overall increase in school worship. It will lead to its near elimination. Those schools which don't want to hold worship on five days will scarcely be persuaded to hold it on one.''
Lady Olga Maitland, Conservative MP for Sutton and Cheam, said: "In the year of Evangelism I am absolutely astounded that Dr Habgood should be saying this."
Sir Rhodes Boyson, MP, a former Conservative education minister, said: "Morning assembly well taken is not only a religious exercise but gives discipline to the day. If teachers are not prepared to fulfil the law they should find someone else who can."
The Department for Education said it had no plans to change the existing laws. Church of England officials think that Mr Patten's guidelines on school religious worship are too strict.
Dr Habgood, who was once vetoed by Baroness Thatcher for the job of Bishop of London, belongs to the church's liberal wing.
David Blunkett, Labour's education spokesman, reserved Labour's position on school worship but said that he thought it was important for assemblies to take multi-cultural issues into account.
Don Foster, Liberal Democrat education spokesman, said: "I personally believe there is no justification for requiring schools to have a daily act of worship. It needs to be led by people who believe and should be attended by those who believe."Reuse content