US Edition Thousands of women in Britain, including Cherie Blair, use the powdered milk, which is marketed as "healthier" and "easier to digest".
Sales of Nanny Infant Nutrition, the leading brand, have risen 40 per cent in two years and Babynat launched an organic version in December.
Last night the Department of Health said: "Goats' milk is not suitable for babies, and infant formulas and follow-on formulas based on goats' milk protein have not been approved for use in Europe."
The trend towards using goats' milk appears to reflect the increase in the number of babies reported to be either allergic to dairy milk or unable to digest it. However, the Department of Health said the proteins in cow and goat milk were so similar that a baby intolerant of one would be intolerant of the other. An official added: "Scientific evidence put to the EU regulators suggests that goat milk is unsuitable because the level of proteins are too concentrated for very young babies, and some sources of goats' milk are not pasturised."
This will surprise mothers who have been advised by alternative medicine practitioners to switch to goats' milk to treat ailments from skin conditions to stuffy noses. An assistant at the Fresh & Wild health food chain in London said: "Around 40 per cent of our baby milk sales are goats' milk. Most people believe it has fewer side-effects."
Dr Harvey Marcovitch, of the Royal College of Paediatrics and Child Health, said parents were too quick to imagine a problem with cows' milk. "Less than five per cent of babies are allergic to cows' milk proteins - and there are carefully designed formulas for such cases," he said.
Dr Michael Markiewicz, consultant paediatrician at the Chelsea & Westminster Hospital, said: "I can't think of one single reason to recommend goats' milk."
Even Charles Redfern, the managing director of Organico, which supplies Babynat's organic goats' milk powder in Britain, said: "I personally would chose traditional, but organic, formula over the goats' milk.
"While I think goats' milk is perfectly safe for babies over four months, it's a silly argument to say that it is closer to breast milk."
Last night Vitacare, which makes Nanny, maintained its stance. Fiona Instance, a director, told The Sunday Telegraph: "Nanny is closer to breast milk than cows' milk formula and it is safe to give it to babies from birth. Cherie Blair herself ordered Nanny directly from us for her youngest son, Leo."