Bed and breakfasts run by Christians should be allowed to turn away gay couples on religious grounds, a leading Conservative has said.
Shadow home secretary Chris Grayling said hotels should not be allowed to discriminate against homosexuals.
But, in a secret recording, he suggested individuals should have the right to decide who stays in their home.
The comments, made at a meeting of the Centre for Policy Studies thinktank, have sparked anger among gay rights activists.
After his remarks were published in The Observer, Mr Grayling said he was not opposed to gay rights and would not be pressing for a change in the law.
The row comes after the owner of the Swiss BandB in Cookham, Berkshire, was reported to the police for refusing to take in a gay couple on the grounds it was against her Christian principles.
The recording of the meeting on Wednesday shows Mr Grayling said: 'I think we need to allow people to have their own consciences.
'I took the view that if it's a question of somebody who's doing a BandB in their own home, that individual should have the right to decide who does and who doesn't come into their own home.'
The couple who were refused a room by the Swiss BandB told Sky News Mr Grayling's comments were 'nearly as bad as being turned away from the BandB in the first place'.
'You don't expect that sort of attitude from a public figure. You expect it from some anonymous bigot, maybe, but not from someone in his position,' Michael Black said, sitting next to his partner John Morgan.
Business Secretary Peter Mandelson told Sky News the row said a 'great deal' about the Conservatives.
'I think what it shows is that the Tories haven't really changed. When the camera is on they say one thing, when the camera is off they say another,' he said.
'The law is the law and we should live within it,' he added.
Ben Summerskill, chief executive of the gay rights group Stonewall, said the comments would be 'very alarming to a lot of gay people who may have been thinking of voting Conservative'.
He said allowing BandB owners to turn away gay couples would be contrary to sex equality legislation brought in in 2007 - which Mr Grayling backed.
'The legal position is perfectly clear,' Mr Summerskill told The Observer.
'If you are going to offer the public a commercial service - and BandBs are a commercial service - then people cannot be refused that service on the grounds of sexuality.'
He added: 'I don't think anyone, including the Tories, wants to go back to the days where there is a sign outside saying: 'No gays, no blacks, no Irish'.'
Mr Grayling said: 'Any suggestion that I am against gay rights is wholly wrong.
'It is a matter of record that I voted for civil partnerships. I also voted in favour of the legislation that prohibited bed and breakfast owners from discriminating against gay people.
'However, this is a difficult area and on Wednesday I made comments which reflected my view that we must be sensitive to the genuinely held principles of faith groups in this country.'