The guidance paper from the Department for Education and Skills (DFES) would leave it up to individual head teachers to decide what pupils should and should not be allowed to wear in class, a DFES spokesman said.
"If they feel any garment imposes on a child's ability to learn or is a safety or security issue they could be banned," the spokesman said.
The new school guidelines come after a British girl lost a legal battle a year ago to be allowed to wear full Islamic dress in school. Shabina Begum's case was likened to a row in France triggered by a ban on Muslim headscarves in state schools.
Muslim veils have been a hot political issue since senior minister Jack Straw said last October they made community relations "more difficult". British Prime Minister Tony Blair then described the full-face niqab as a "mark of separation".
Some Muslim groups accuse the government of creating an atmosphere of Islamophobia.
The DFES said its guidance will recommend teachers take into account the religious requirements of some pupils to wear items such as a turban.
"They should have regard to a range of religions and try to accommodate them where possible," the spokesman said. "But what we are saying in the guidance is that safety, security and the ability to learn is paramount."
Referring to the niqab, he said: "Some teachers say it is difficult to read a child's expression or understand what is being said."
The education department's document says schools should consult widely with parents, governors and the local community on uniform policy before making any decisions.
Copies of the paper will be sent to schools and published on the DFES Web site. It will then be discussed and a final version published in coming months, the spokesman said.
Rajnaara Akhtar, chairman of Britain's Protect-Hijab group, said it was reasonable for schools to ask girls to remove a niqab in class.
"I think the individuals who want to wear the niqab should exercise a degree of flexibility," she said. "It's not only in England, you have Muslim countries around the world which do impose the same requirements."
However she said it would be wrong for head teachers to ban girls from wearing niqabs anywhere on school grounds.
A number of recent high-profile security incidents have also focused attention on Islamic clothing.
In February, the trial of six men accused of plotting suicide bombings in London on July 21, 2005, was told by prosecutors one of the suspects had escaped disguised as a woman in a burqa after the failed attacks.
Two months earlier police said a man wanted for questioning over the murder of a female police officer could have fled the country disguised as a Muslim woman wearing a full veil.