Gordon Brown condemned wildcat strikes as indefensible amid frantic efforts to prevent the row over the use of foreign labour escalating into mass industrial action.
The Prime Minister said he recognised people were "worried" about jobs being taken by workers from other countries, but stressed that the UK was part of a "single European market".
He also sought to explain his pledge of "British jobs for British workers", insisting he had only meant people would be given the skills to compete against other nationalities.
The comments, in an interview with the BBC's Politics Show, came as efforts continued to stop tensions spiralling out of control.
Officials from government departments, unions, employers and the mediation service Acas have been in frantic discussions following a series of wildcat strikes that erupted across the country on Friday.
The protests were prompted by a decision to bring in hundreds of Italian and Portuguese contractors to work on a new £200 million plant at the giant Lindsey Oil Refinery at North Killingholme, North Lincolnshire. Unions claim Britons were not given any opportunity to apply for the posts.
Earlier yesterday, Business Secretary Lord Mandelson promised that the Government would "make sure that both domestic UK law and European rules are being applied properly and fairly".
"But it would be a huge mistake to retreat from a policy where within the rules, UK companies can operate in Europe and European companies can operate here," he added.
"Protectionism would be a sure-fire way of turning recession into depression."
In his interview, to be broadcast today, the Prime Minister was asked what his message would be to those thinking of staging sympathy strikes on Monday.
"That that's not the right thing to do and it's not defensible," he replied. "What we've set up as a process to deal with the questions that people have been asking about what has happened in this particular instance."
He went on: "When I talked about British jobs, I was taking about giving people in Britain the skills, so that they have the ability to get jobs which were at present going to people from abroad and actually encouraging people to take up the courses and the education and learning that is necessary for British workers to be far more skilled for the future."
However, the Government's stance was given short shrift by the unions.
Paul Kenny, general secretary of the GMB, told the Press Association: "No company should be able to discriminate against anyone on the grounds of where they were born.
"You simply cannot say that only Italians can apply for jobs as has happened in this case.
"No-one is saying that different countries cannot bid for different contracts.
"What is happening here would be illegal under UK domestic law."
Acas was drafted in on Friday night by Employment Minister Pat McFadden to mediate between the opposing parties, amid threats of mass industrial action.
But some MPs said there was little that could be done to resolve the dispute while the UK remains a member of the European Union.
Former welfare minister Frank Field laid into Mr Brown's now infamous line about providing "British jobs for British workers"
The MP for Birkenhead said: "These strikes are proving to be for Gordon Brown a double whammy.
"The claim of 'British jobs for British workers' looks a pretty empty promise.
"Worse still, it shows the European Union has us in a double arm lock.
"British workers are being specifically excluded from working on contracts by European contractors - contracts won by European contractors to operate in our very own country."
Mr Field's comments were echoed by UKIP leader Nigel Farage who offered a gloomy prognosis on what the talks could achieve.
He said: "The government, Acas, the unions, thousands upon thousands of angry workers are all entirely impotent.
"This is European Union law and it's been confirmed by the European Court of Justice in two separate cases, Laval and Viking.
"It doesn't matter how many meetings are held, how much or how loud anyone shouts, there's nothing anyone in this country can do. For we've signed away our rights when we joined this prison of nations that is the EU."
He added: "British jobs for British workers will only happen when Britain is run by and for Britons."
Union leaders and representatives of engineering construction firms and contractors are expected to meet in London next week in a bid to find a way of resolving the row.
The so-called National Joint Council will meet on Wednesday. This will be followed by a meeting of union shop stewards a few days later.
Mr McFadden said he had asked Acas to examine claims that British workers were being illegally excluded from some major engineering and construction projects.
There was speculation that the dispute will escalate tomorrow and spread "like wildfire" across the country if the deadlock is not broken.
Shadow foreign secretary William Hague said Mr Brown's "British jobs for British workers" pledge was "unbelievably ridiculous and silly".
He told BBC1's Andrew Marr show the protesters "clearly have some legitimate questions" but said strikes were "never the way forward".
Mr Hague said: "If a company was saying that they are never going to take on British workers, well that would clearly be illegal.
"But when Gordon Brown said 'British jobs for British workers' ... it was a fiction in pretending that that could be guaranteed because there is free movement of workers within the European Union."
He said no mainstream political party would be able to keep Mr Brown's pledge "which is why it was so unbelievably ridiculous and silly of the Prime Minister to say that in the first place".
But Mr Hague added that the Conservatives would "do more to promote employment and to combat unemployment than is being done in this country at the moment".
Health Secretary Alan Johnson - a former trade union leader - insisted that wildcat strikes were "unhelpful".
He said free movement of labour was "fundamental" to the EU, but suggested European court judgments could have "distorted" the rules.
"If workers are being brought across here on worse terms and conditions to actually get jobs in front of British workers on the basis of dumbing down the terms and conditions that would be wrong, and I understand the anger about that," Mr Johnson told the BBC's Andrew Marr Show.
"These various judgments have distorted the original intention and we need to bring in fresh directives to make it absolutely clear that people cannot be undercut in this way."