In an outspoken attack, the Rt Rev Nigel McCulloch said the group had 'a racial analysis at the core of its philosophy' that was incompatible with British democracy.
He called for all mainstream parties - and people of all faiths - to reject the BNP in European Parliament elections this summer.
The bishop was speaking at a meeting of the full council at Manchester town hall.
"There are those who do not share our vision of Manchester and who will seek political success by preaching a message of division and hatred," he said. "They will use racism and other prejudice to challenge the very diversity which strengthens our city.
"They will exploit the difficult times which presently face our country, trying to turn one community against the other.
Scapegoat
"They will use difference as a scapegoat, because they have nothing else to offer in response to the issues we face."
The bishop added: "At the heart of our political process is belief in democratic representation - a belief that values difference and, yes, seeks the common good. The BNP does neither. It offers only division, fear and hatred.
"I make no apology for speaking of the BNP directly. This party has a racial analysis at the core of its philosophy. It claims that it is not a racist party, but it calls at least for a segregation of the races."
The bishop denied his attack was `over the top' and simply giving the BNP 'the oxygen of publicity'.
He compared the situation to pre-war Germany, quoting a pastor who regretted failing to speak out against the Nazis.
"I don't need to remind you that the Nazi party was democratically elected by the German population," he added. "That is why a key task for us must be to deliver the maximum possible turnout at the European elections in June."
Bishop Nigel is the first bishop in living memory to address a council meeting in Manchester.
He was speaking in support of the cross-party `Hope not Hate' campaign, which is seeking to marginalise the BNP and other extremist groups.
The council went on to pass a motion condemning those who 'deliver messages of hate aimed to divide our communities and whip up intolerance and violence against our neighbours'.
The BNP is planning to target the north west region in the June elections, with leader Nick Griffin at the top of their list of candidates.
Simon Darby, deputy leader of the BNP, said: "It is not up to the church to tell people who they can and cannot vote for.
"He talks about democracy but democracy is when people decide. It is not done by senior members of the church abusing their position by trying to bully people."
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Frostee, Oldham (25/03/2009 at 13:16)
But that just equates somewhat to what many, if not most, religions preach does it not? Oh, and for those who think it is only Islam that wants homosexuals and various others put to death in distinctly ghastly ways - read the Christian bible, there's enough material in there for the production of a horror movie. Indeed, when compared to the BNP, religions are way ahead in the context of 'division, fear and hatred'.