In an effort to appease Tory backbenchers calling for tougher measures in the new legislation, Theresa May has tabled an amendment that would allow the removal of a UK passport from terror suspects.
This would allow her to make people stateless if they have been naturalised as a British citizen.
The Government faces a backbench rebellion when the Immigration Bill returns to the Commons today.
But the Home Office insisted powers to make British citizens stateless will be used sparingly and in strict accordance with the UK's international obligations.
Immigration Minister Mark Harper said: "Those who threaten this country's security put us all at risk. This Government will take all necessary steps to protect the public.
"Citizenship is a privilege, not a right. These proposals will strengthen the Home Secretary's powers to ensure that very dangerous individuals can be excluded if it is in the public interest to do so."
It follows the case of Hilal al Jedda, who fled Saddam Hussain in 1992, but returned to Iraq in 2004 where he was suspected of involvement in terrorism and in 2007 was stripped of British nationality. Al Jedda, who now lives in Turkey, has since been fighting against the move through legal appeals.
Last October Supreme Court judges ruled it illegal to make him stateless.
Ms May has stripped al Jedda of his UK citizenship.
A spokesman for legal charity Reprieve said: "This is a very alarming development, which reverses a long-standing ban on citizenship-stripping where doing so would leave someone stateless."