Nick Herbert told MPs that if there was an outright ban on officers carrying out secret missions from starting relationships with those they had under surveillance, it would create a simple way for their loyalties to be tested.
He said he did not think there needed to be set rules governing sexual relationships involving police, but that instead officers infiltrating groups and gangs needed to be managed closely.
The police minister said in a Westminster Hall debate on Wednesday: "I am not persuaded that it would be appropriate to issue specific statutory guidance under Ripa [the law that governs undercover operations] about sexual relationships.
"What matters is that there is a general structure and system of proper oversight and control, rather than specific directions on behaviour that may or may not be permitted.
"Moreover, to ban such actions would provide a ready-made test for the targeted criminal group to find out whether an undercover officer was deployed among them. Specifically forbidding the action would put the issue in the public domain and such groups would know that it could be tested."
He added: "The Ripa statutory guidance does not explicitly cover the matter of sexual relationships, but it does make it clear that close management and control should be exercised by the undercover officer's management team."
Mr Herbert was responding to questions by Caroline Lucas, Parliament's first Green Party MP, about whether or not undercover officers are allowed to form relationships with people in groups they were trying to infiltrate, under the Regulation of Investigatory Powers Act 2000.
She raised the case of eight women who are taking legal action against the Metropolitan Police, claiming they were "duped into forming long-term loving relationships with undercover policemen".
Ms Lucas said that the women claim the officers breached their human rights, specifically by subjecting them to inhuman or degrading treatment and denying them the right to "form relationships without unjustified interference by the state". They also claim deceit, misfeasance in public office and assault.
The MP, whose words were covered by parliamentary privilege, alleged that officers named by the women included Mark Kennedy, whose actions led to the collapse of a trial of environmental protesters, and Bob Lambert, whom she also accused of planting a bomb in a department store while undercover with animal rights activists.
Ms Lucas said it had been reported that Mr Lambert "secretly fathered a child with a political campaigner whom he had been sent to spy on, and later disappeared completely from the life of the child, concealing his true identity from the child's mother for many years".
She went on: "Lambert has admitted having had a long-term relationship with a second woman to bolster his credibility as a committed campaigner, and he subsequently went on to head the special demonstration squad and mentor other undercover officers who formed deceitful relationships with women."
Ms Lucas claimed the police authorities "have made virtually no attempt to hold those or other men to account, or to examine whether they have broken any rules on relationships when undercover".
She concluded: "To paraphrase one of the women involved, it is incredible that in most circumstances the police need permission to search someone's house, but if they want to send in an agent who may sleep and live with activists in their homes, that can happen without any apparent oversight."
