Reverend Tim Jones said society "leaves some people little option but crime," the BBC reported.
The Anglican clergyman made the controversial remarks while addressing the subject of how poverty-stricken people deal with the holiday season during his Sunday sermon.
The Daily Mail newspaper reported that Jones said it "is permissible for those who are in desperate situations to take food that they might not starve."
"My advice, as a Christian priest, is to shoplift," he told parishioners in the northern England city of York.
"I do not offer such advice because I think that stealing is a good thing, or because I think it is harmless, for it is neither.
"I would ask that they do not steal from small family businesses, but from large national businesses, knowing that the costs are ultimately passed on to the rest of us in the form of higher prices."
'Indifference and contempt'
Jones, a father of two, said people who find themselves suddenly unemployed or released from prison are often treated with "indifference and contempt."
He suggested that shoplifting was preferable to prostitution, burglary or violent crime.
Jones said that those in dire straits "should not hurt anybody and cope as best they can".
"When we, as a society, let our most vulnerable people down so terribly badly, I would rather that people take an 80 pence ($1.28) can of ravioli rather than turn to some of the most appalling things," Jones told BBC Breakfast on Tuesday. "Burglary causes untold harm and damage to people in a way that taking a can of spaghetti rings from a supermarket doesn't.
"That's not to say that shoplifting is good. Shoplifting is a dreadful thing but sometimes that's all we leave people with."
The Venerable Richard Seed, Archdeacon of York, distanced himself from the the priest's remarks. "The Church of England does not advise anyone to shoplift, or break the law in any way," he added.
A spokesman for North Yorkshire Police described Jones' sermon as "highly irresponsible," while the British Retail Consortium also condemned the clergyman's views.