Bishop of Galway Martin Drennan said there was very little support for such a practice.
Over the past couple of years parishioners of the north Clare village have brought the remains of deceased people to lie in repose in a coffin in the Catholic church the night before a funeral.
Earlier this month, Bishop Drennan wrote to the parishioners calling on them to stop the practice, prompting Mr Dooley to write his letter to the bishop.
However, in his response to the TD, Bishop Drennan stated: "There are parishes with much less resources than Liscannor that have built funeral homes. Other parishes use funeral homes in nearby parishes.
"For them, the current diocesan policy is accepted as good policy.
"Of course, I have no desire to alienate people from the Church, but I believe that lowering standards is in fact a lack of respect for them.
Earlier in his letter, Dr Drennan stated: "The issue of this use of churches has not come on the agenda in my four years in the diocese.
"In the past week, there have been no calls to the office, no emails, no letters, so there seems to be very little support for the Liscannor practice.
"In your party, policies are there for the good of all the members. With us, policy is there to serve the unity of the diocese."
In a responding letter, Deputy Dooley pointed out that the church was part of the community and generally "the responsibility of local membership".
"Furthermore, in the neighbouring dioceses many churches are used as mortuary chapels and indeed, in some cases, to host special concerts.
"I suppose it is difficult for parishioners in Liscannor to understand why churches in other parts of the same county, following the same Catholic faith, can be used in a manner that is denied to them by elements within the hierarchy.
"I would again appeal to you to reconsider your decision and allow the current practice to continue," the TD added.
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