The Sunday Telegraph report says that the government is thinking of creating up to 150 Muslim schools within the state sector in an attempt to bring them more into the mainstream of British life.
It would in effect be a government takeover bid for independent Muslim schools, many of which are hampered by a shortage of funds and some of which concentrate on study of the Quran to the detriment of a more basic curriculum.
At present there are only five Muslim schools within the state sector. The first, Islamia school in North London, founded by the singer Cat Stevens (Yusuf Islam), was granted state recognition in 1998.
Of the nearly 14,000 state primary and secondary schools in England and Wales (Scotland has a separate educational system), roughly half are run by churches and other faith communities: 4,600 are Church of England (Anglican), 2,100 Catholic, with a handful of Methodist and other Christian schools. There are 31 Jewish schools and two Sikh schools.
Asked at a press conference last Friday whether Muslim state schools should continue, Prime Minister Tony Blair said: "We are actually looking to make sure that faith schools are very much incorporated into the mainstream, and that should apply to all categories of faith school.
"The point is to encourage as much of that in the mainstream. We are having a discussion about how that operates."
Education Secretary Ruth Kelly is expected to announce detailed proposals this autumn.