Declassified British state papers reveal that the Papal Nuncio in Ireland told the British government that this law would amount to religious discrimination.
The British government subsequently agreed to amend the new Policing Act in 2000 so that Opus Dei would not be listed as a "notifiable organisation" for the Police Service of Northern Ireland.
Plans for the new police force in Northern Ireland had included a proposal that officers be required to state if they belonged to a number of organisations such as the Orange Order or the Freemasons.
Under pressure from Unionist politicians, the British government agreed to include Opus Dei and the Knights of St Columbanus on the list.
However the Papal Nuncio in Ireland Archbishop Luciano Storero wrote a highly critical letter to the Northern Ireland secretary Peter Mandelson.
He pointed out that Opus Dei was part of the Catholic Church and ecclesiastical law did not allow membership of it to interfere in the congregation's professional or political affairs.
The Papal Nuncio said there was an inference in the proposed law that the British government did not believe this.
"It would be seriously unjust and gratuitously offensive to enact such a discriminatory provision in a basis of ignorance or of wholly unfounded suspicions," Archbishop Storero stated.
"Are other churches to be mistreated in a similar fashion?"
The strength of the Vatican's response was noted in British government memos where fears were expressed that the controversy could escalate.
"In 'Vatican speak' the letter is quite strong," stated British government policy advisor Francis Campbell.
"The Vatican is watching the matter very closely."
He advised British government Chief of Staff Jonathan Powell that this letter would not have been sent without the personal backing of Pope John Paul II.
He also stated that a meeting was scheduled to take place with church representatives the following day in the memo which was dated 19 July 2000.
The then Archbishop of Armagh Seán Brady and Bishop of Derry Edward Daly would also be making "strong representations" in the near future he said.
Mr Campbell wrote: "The Irish bishops are privately very annoyed that the government has singled out the Catholic Church by mentioning two of its internal organisations while ignoring the organisations of other churches in Northern Ireland."
He added that there was a danger the situation could "mushroom" into a church-state row and suggested a number of options to "get out of this mess".
These included adding internal church groups from other denominations to the list, requiring officers to list membership of all organisations or substituting the Irish National Foresters society for the Catholic organisations.
In the event the British government agreed to amend the Police Act in the House of Lords and remove Opus Dei from the list.
Mr Mandelson informed British Prime Minister Tony Blair on 3 October that this was because it was an issue for the Catholic Church.
However the Knights of St Columbanus remained as a notifiable organisation.
One government file relating to the controversy entitled Patten Bill: Catholic Church dated 3 October has been withheld and remains classified.
The Police (Northern Ireland) Act 2000 set up the Police Service of Northern Ireland (PSNI) after months of negotiations on issues such as the name, symbol and whether recruitment would be 50/50 from both communities.
The most recent figures on membership of notifiable organisations found that of the 7,000 officers in the PSNI, 168 declared membership of Protestant groups – the Orange Order, the Royal Black Preceptory, the Apprentice Boys of Derry and the Independent Orange Order in 2021.
A further 156 declared themselves to be Freemasons according to a Freedom of Information request.
Just two officers were in Catholic fraternal organisations – one each in the Ancient Order of Hibernians and the Knights of St Columbanus.
A spokesperson for the PSNI said the list of notifiable organisations is under review.
File references for British government records: 49/1463, 49/1464, 49/1466