The Most Reverend Justin Welby said the limit was “neither moral nor necessary” and it “falls short of our values as a society”.
Shadow health secretary Wes Streeting said he welcomed the Archbishop’s intervention but Labour could not promise to scrap the policy without being able to set out how to pay for it.
Mr Welby framed his intervention as a plea to all parties to commit to scrapping the policy.
Prime Minister Rishi Sunak has already committed to keep it if the Tories remain in power after the general election while Sir Keir Starmer has so far resisted calls to scrap it despite claiming ending child poverty is “central” to his plans for government.
The cap, which was introduced in 2017, restricts child tax credit and universal credit to the first two children in most households.
Mr Streeting said he voted against the two-child limit “so by definition, I wish it wasn’t there”.
He told Sky News: “One of the consequences of the Conservatives’ disastrous handling of the economy is the public finances are in the mess and there are harder choices to make.
“So, unless and until I can sit on your programme and say ‘we will do X by funding it through Y’, that’s not a commitment I’m able to make today.”
He defended the Archbishop for speaking out on political matters, saying that “virtue signalling” is “literally his job”.
Mr Streeting said: “You’re never going to find, if there’s a Labour government, politicians being sent out to attack the Archbishop of Canterbury for virtue signalling, as Conservative MPs have done. It is literally his job. He’s the one person in the country whose job it is to signal virtue.
“If the mission of the church is not to alleviate poverty and suffering, then I don’t know what is.”
The Archbishop told the Observer: “The two-child limit falls short of our values as a society. It denies the truth that all children are of equal and immeasurable worth, and will have an impact on their long-term health, wellbeing and educational outcomes.”
The Archbishop’s intervention will increase pressure on Sir Keir to act if Labour comes into power.
Sir Keir was challenged on his position when he launched his plan for Labour’s “first steps” in office on Thursday.
He said tackling child poverty was “central to an incoming Labour government” but “what I can’t do is make promises that I can’t deliver on”.
The Archbishop of Canterbury said: “This cruel policy is neither moral nor necessary.
“We are a country that can and should provide for those most in need, following the example of Jesus Christ, who served the poorest in society.
“As a meaningful step towards ending poverty, and recognising the growing concern across the political spectrum, I urge all parties to commit to abolishing the two-child limit.”