The Government wants the minimum strength of still wine to be reduced from 8.5% to 4.5% alcohol-by-volume (ABV), about one-third the strength of many typical table wines, and has promised to step up efforts to rewrite the relevant European Union rules.
Health Minister Earl Howe claimed in a letter to peers that the market for low or reduced alcohol "wines" has been "increasingly rapidly" in recent years.
He insisted that promoting low alcohol wines was in customers' "best long term interests", amid concerns over a rise in liver diseases and cancers linked to alcohol consumption.
"The Government has consistently made the case for change to the EU wine rules to permit reduced and de-alcoholised products to be called wines," he said.
The latest round of EU negotiations over the Common Agricultural Policy failed to reach an agreement on redefining wines to include alcohol free drinks.
However, the minister promised to "continue to work hard to bring this topic back onto the EU wine policy agenda as soon as possible".
Almost seven million bottles of wine with an alcohol content of less than 8.5% were sold in Britain in 2011, two million more bottles than the year before.
A government spokeswoman said: "We want to encourage alcohol manufacturers to make lower alcohol alternatives - these rules do not help our cause.
"We will continue our efforts to change EU wine rules, to allow all wine producers to make and market lower alcohol products. This will help to help promote healthier choices and tackle the serious harm alcohol causes."
Wine and Spirit Trade Association chief executive Miles Beale said: "As for all agricultural products, wine regulations are made at EU level.
"The WSTA has been working for a number of years to support changes to EU wine regulations to allow more alcohol to be removed from wine to meet market demand.
"Changes to the regulations would provide greater flexibility for winemakers across Europe and help to broaden consumer choice."