The Vatican said on Tuesday Christian denominations outside Roman Catholicism were not full churches of Jesus Christ.
Protestant leaders said this was offensive and would hurt inter-religious dialogue.
A 16-page document by the Congregation for the Doctrine of the Faith, which Pope Benedict once headed, described Christian Orthodox churches as true churches, but suffering from a "wound" since they do not recognize the primacy of Pope.
But the document said the "wound is still more profound" in Protestant denominations.
"Despite the fact that this teaching has created no little distress ... it is nevertheless difficult to see how the title of 'Church' could possibly be attributed to them," it said.
The Vatican text, which restates the controversial document "Dominus Iesus" issued by the then Cardinal Joseph Ratzinger in 2000, said the Church wanted to stress this point because some Catholic theologians continued to misunderstand it.
Ratzinger was elected Pope in April 2005. The document is his second strong reaffirmation of Catholic tradition in four days, following a decree on Saturday restoring the old Latin Mass alongside the modern liturgy.
The document said dialogue with other Christians remained "one of the priorities of the Catholic Church".
But Bishop Wolfgang Huber, head of the Protestant umbrella group Evangelical Church in Germany (EKD), said the new Vatican document effectively downgraded Protestant churches and would make ecumenical relations more difficult.
Huber said the new pronouncement repeated the "offensive statements" of the 2000 document and was a "missed opportunity" to patch up relations with Protestants.
"The hope for a change in the ecumenical situation has been pushed further away by the document published today," he said.
A statement from The French Protestant Federation said that while the document was an internal pronouncement of the Catholic Church, it would have "external repercussions".
SECOND VATICAN COUNCIL
The document, issued by Benedict's successor in doctrinal matters, Cardinal William Levada, aimed to correct what it called "erroneous or ambiguous" interpretations of the Second Vatican Council, which took place from 1962 to 1965.
Church modernizers interpreted the Council as a break from the past while conservatives, like Benedict, see it in continuity with 2,000 years of Catholic tradition.
The document said the Council's opening to other faiths recognized there were "many elements of sanctification and truth" in other Christian denominations, but stressed only Catholicism had all the elements to be Christ's Church fully.
The text refers to "ecclesial communities originating from the Reformation", a term used to refer to Protestants and Anglicans.
Father Augustine Di Noia, Under-Secretary for the Congregation for the Doctrine of the Faith, said the document did not alter the commitment for ecumenical dialogue, but aimed to assert Catholic identity in those talks.
"The Church is not backtracking on ecumenical commitment," Di Noia told Vatican radio.