Cardinal Cormac Murphy-O'Connor accused Labour of "legislating for intolerance" in his most outspoken attack yet on the imposition of gay rights laws on church bodies.
The leader of England and Wales's four million Roman Catholics also questioned "whether the threads holding together democracy have begun to unravel".
The lecture delivered in Westminster made him the first Catholic leader in nearly 180 years to place a question mark over the allegiance of his church to the British state.
He has already threatened to close nine Catholic adoption agencies if they are forced by the Sexual Orientation Regulations to place children with homosexual couples.
He declared: "For my own part, I have no difficulty in being a proud British Catholic citizen.
"But now it seems to me we are being asked to accept a different version of our democracy, one in which diversity and equality are held to be at odds with religion.
"We Catholics - and here I am sure I speak too for other Christians and all people of faith - do not demand special privileges, but we do demand our rights."
The Sexual Orientation Regulations come into force next month after minimal debate in the House of Commons.
They are aimed at stopping businesses discriminating against gays, but Christian leaders say they will force those of faith to act against their conscience.
Cardinal Murphy-O'Connor said last night: "My fear is that, under the guise of legislating for what is said to be tolerance, we are legislating for intolerance. Once this begins, it is hard to see where it ends.
"My fear is that in an attempt to clear the public square of what are seen as unacceptable intrusions, we weaken the pillars on which that public square is erected, and we will discover that the pillars of pluralism may not survive.
"The question," the Cardinal added, "is whether the threads holding together pluralist democracy have begun to unravel. That is why I have sounded this note of alarm.
"I am conscious that when an essential core of our democratic freedom risks being undermined, subsequent generations will hold to account those who were able to raise their voices yet stayed silent."
He also fueled speculation that Catholics may order their adoption agencies to break away from links with the state - and forgo their £10 million a year of taxpayers' funds in favour of relying on donations.
The Cardinal said: "I wonder how far we can still claim as British the assumption that if a religious organisation serves the public interest according to its own rights, it has a legitimate claim on public resources.
"I begin to wonder whether Britain will continue to be a place which protects and welcomes the works of people shaped and inspired by the church." The Cardinal said he feared intolerance of Christianity "so when Christians stand by their beliefs, they are intolerant dogmatists. When they sin, they are hypocrites.
"When they take the side of the poor, they are soft-headed liberals. When they seek to defend the family, they are Rightwing reactionaries."
He added: "What looks like liberality is in reality a radical exclusion of religion from the public sphere."
Catholic leaders have made a powerful point of their loyalty to the British state since full civil rights were granted to Roman Catholics by the Catholic Emancipation Act of 1829.
The Cardinal described the Act as a historic turning point.
The speech is likely to make uncomfortable reading for Tony Blair - he is expected to convert to Roman Catholicism after he leaves Downing Street later this year - and for Communities Secretary Ruth Kelly, a staunch Catholic responsible for pushing through the Sexual Orientation Regulations.
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