Writing in the Daily Telegraph, the former Bishop of Rochester welcomed the Prime Minister's recent affirmation of the crucial role of Christianity in providing a moral framework for Britain.
However Bishop Nazir-Ali questioned the extent to which David Cameron's support for Christianity would bear on policy-making and legislation.
"The [Christian] tradition must remain central to our public life," he said.
Specifically, the bishop called for the improvement of religious literacy in the civil service, parliament and local authorities.
"What Cameron has said about the ways in which Christian ideas are embedded in our constitutional arrangements is simply not understood any more in the corridors of power," he said.
"A disconnected view of history and the fog of multiculturalism have all but erased such memory from official consciousness.
"A concerted programme is needed if this literacy is to be recovered and used."
The bishop linked the lack of religious literacy to the place of Christianity in the teaching of British history.
He wrote: "Michael Gove has rightly seen that history cannot be just about discrete dates and famous personalities but must be a narrative of the emergence of a people and a nation from the mists of time. For such a project, the place of Christianity is absolutely central.
"For better or for worse, there would not be a narrative worth the name without taking the influence of Christianity into account."
The bishop continued by urging the Government to respect the conscience of believers in new legislation.
"The equality of all before the law is an important development from Judaeo-Christian influence on the law but so is respect for conscience, especially as it is formed by a moral and spiritual tradition such as Christianity," he said.
"I would hope that legislation initiated by this government will, more and more, respect the consciences of believers."
He called for similar legal protection to the First Amendment in the United States' constitution, which provides for the 'reasonable accommodation' of religious beliefs at the work place.
"It is easy to see that if such a doctrine had been in place in this country we would not have seen the absurd dismissals (and even more absurd judicial decisions that upheld them) of Christians and others because they could not undertake certain tasks on account of their faith," he said.
"The idea of reasonable accommodation could certainly provide further grounds for respecting conscience in matters that are controversial."
Bishop Nazir-Ali said that while churches and Christian agencies would welcome greater participation in the Big Society, he added that "their integrity must also be respected".
"They cannot simply be surrogate service-providers for the Government," he said.
"What they say and do spring from their beliefs and the authorities will have to respect these if there is to be genuine dialogue and collaboration.
"Let us hope and pray that the Prime Minister's recognition of the importance of the Bible and of Christianity in public life will provide a springboard for such cooperation and understanding in this New Year."