The Scottish Parent Teacher Council (SPTC) said school communities that no longer wanted a religious element to meetings such as assemblies should be allowed to replace them with secular alternatives.
The controversial call from the group which represents PTAs and parent councils across the country comes in the wake of a petition to the Scottish Parliament by the Scottish Secular Society.
The society is calling for a change to the Education (Scotland) Act 1980 to make religious observance an opt-in activity, rather than an opt-out one, as is currently the case.
Scottish novelist Christopher Brookmyre, chief executive of the British Humanist Association Andrew Copson and the Richard Dawkins Foundation for Reason and Science have backed the petition.
According to 2011 Census statistics, Scotland is moving away from Christianity. Figures showed 54% of residents saw themselves as Christian - down 11% since 2001.
In its response to the Holyrood petition, Eileen Prior, executive director of the SPTC, said: "Overall, the concept of religious observance has been watered down in an attempt to fit it to Scotland as it is today, a multi-faith and no-faith society that has moved a long way since 1980.
"Generally, we feel the time has come to remove the compulsory requirement on schools for religious observance and replace it by a more secular duty for the development of the whole person, as recognised in the curriculum.
"Ultimately, we think the nature, organisation, venue and frequency of school-based religious gatherings should be determined locally, with the agreement of the school community."
Ms Prior said in some areas that might mean the continuation of religious observance while in others the focus might be on secular spiritual development.
The suggestions were dismissed by both the Church of Scotland and the Catholic Church.
A Church of Scotland spokesman said: "We think religious observance, or time for reflection, in schools is an essential activity for young people to learn about and better understand our world.
"We fully support an approach which takes into account the diversity of a school community with regard to pupils and staff from a wide range of traditions, including those with no religion.
"The Church believes that time for reflection or religious observance, as defined by the Scottish Government's 2005 guidelines and 2011 advice letter, provides a fundamental part of the cross-curricular, whole school curriculum in the same way that personal and social development is regarded."
Michael McGrath, director of the Scottish Catholic Education Service, hit out at the SPTC.
He said: "The suggestion would not be acceptable to us even though it would be unlikely to have an impact on our schools. Religious observance across the school system offers an opportunity for the spiritual development of the school community and a reflection of its hopes and aspirations. Religious observance does that really well because it is rooted in the wisdom of a tradition that dates back thousands of years.
"We would not want to see that replaced with a vague, meaningless alternative notion of who we are and where we are going."
The primary headteachers' body the Association of Headteachers and Deputes in Scotland argued a change to opt in would create a "considerable additional administrative burden on schools" without making any change to the flexibility open to children and families.
Last year, The Humanist Society Scotland said pupils in both Catholic and non-denominational schools were being "indoctrinated" with Christian beliefs against Government guidelines.
The society said the legal right of parents to withdraw their children from religious education and religious observance was being widely ignored in state schools.
Since 2005, Scottish schools have been required to make parents aware they can remove their children from religious education and observance.
However, churches believe religious observance in all schools is so inclusive that there would be very few occasions when a parent felt they should exercise the right to opt out.