The Government has been warned by MPs not to rush into a new system which could give developers "carte blanche" to concrete over valuable habitats for wildlife.
The proposals allow developers to compensate for the destruction of habitats by creating or enhancing other natural areas, but a cross-party report has found that the proposed system is too simplistic to take into account the full value of the lost sites.
The Environmental Audit Committee said ministers should not press ahead with the biodiversity offsetting scheme in England until pilot projects set up in 2011 had been properly assessed by independent experts.
The committee's Labour chairwoman Joan Walley said: "Biodiversity offsetting could improve the way our planning system accounts for the damage developments do to wildlife, if it is done well.
"But ministers must take great care to get offsetting right or they risk giving developers carte blanche to concrete over important habitats.
"Many witnesses to the inquiry were concerned that the Government's proposal would allow offsetting to be applied to ancient woodland and Sites of Special Scientific Interest. There is a danger that an overly simplistic offsetting system would not protect these long-established eco-systems."
She said the assessment process proposed by the Government was "little more than a 20-minute box-ticking exercise that is simply not adequate to assess a site's year-round biodiversity".
If a wood was examined in winter "it would be easy to overlook many of the migratory birds that may use it as habitat in the summer", she claimed.
The Government set out its proposals for an offsetting scheme in September, but the MPs warned against pressing ahead until the pilot projects had concluded.
The report said: "Arguably offsetting is an admission of failure in that it should only arise after alternative development sites or means of mitigating the environmental loss from development have been considered.
"A decision on the Government's offsetting proposals should not be made at this time. Offsetting pilots were set up in 2011 and these should be allowed to run their course and then be subjected to the independent evaluation previously promised by ministers.
"If that evaluation concludes that there are benefits in introducing an offsetting scheme, the Government should then bring forward revised proposals that reflect the concerns that we have raised in this report."
The MPs criticised the Government for placing too much weight on experience with offsetting in other countries including Australia "which has little in common with the environmental landscape and development pressures of England".
The report suggested that a m andatory, rather than voluntary, offsetting system would encourage a market to develop, which would in turn allow more environmentally and economically viable projects to be brought forward.
But it called for Natural England to monitor schemes to ensure that a balance of habitat types are covered in the programme rather than the market being allowed to produce "many offsets of a similar, lowest-cost type".
The MPs also stressed the importance of offset habitats being created near to where the original site was located if it was publicly accessible in order to ensure people still have the ability to enjoy nature in their local area.
Simon Pryor, the National Trust's natural environment director, said: "This report shows that Government should take the time to get biodiversity offsetting right.
"Offsetting could be a positive way to help avoid the loss of wildlife that can result from development - but only if it is done properly. If a system is introduced too rapidly, and without adequate testing and evidence, the prospect of a workable and supportable biodiversity offsetting system would be undermined for many years to come."
Friends of the Earth's Sandra Bell said: "We mustn't gamble with Britain's wild spaces - nature cannot just be shifted around the country at the whim of a developer.
"The Government should pull the plug on these madcap 'offsetting' plans and get on with delivering its commitments to protect and boost wildlife through better planning."
A Department for Environment, Food and Rural Affairs spokesman said: "Biodiversity offsetting could help improve our environment as well as boost the economy.
"This report, along with other consultation responses, will help us get the detail of the policy right. We will formally respond to the report in due course."