Local councils will be banned from routinely asking residents about their sexual orientation, transgender status, religion and race.
Local government secretary Eric Pickles said that the surveys, typically sent out with responses to residents’ queries about local services, were “unnecessary and “intrusive”.
But gay rights charity Stonewall said the data collection was necessary to ensure that public services are meeting lesbian, gay and bisexual residents’ needs.
Many councils send out diversity monitoring forms to residents who have submitted queries or complaints. Residents applying for services such as library membership have also been sent the forms.
Usually, questions include sexual orientation, transgender status, gender, race, religion and disability. Some forms have asked residents whether they are HIV-positive or have suffered from mental illness.
Mr Pickles said that the Audit Commission, which is due to be scrapped, had required councils to ask council housing residents for the data, as well as undertaking ‘equality mapping’.
He said: “At a time when taxpayers are watching their pennies, the last thing councils should be doing is sending out unnecessary and intrusive questionnaires.
“Local residents shouldn’t be asked to reveal detailed personal information just because they’ve enquired about getting their bins emptied or how to join their local library.
“Clamping down on such town hall activity will save taxpayers’ money and protect the privacy of residents of all backgrounds.”
Stonewall, which has lobbied for more data collection on lesbian, gay and bisexual people, said it opposed the move.
A spokesman said: “Stonewall’s support of monitoring is crystal clear. If public services don’t monitor across equality strands then how can they know whether they are effectively meeting their taxpayers’ needs?
“For example, the rate of breast cancer is higher among lesbians, so knowing how many lesbians live in a particular area is vital for health services to provide the right services.
“If councils stop monitoring across these equality strands they will not be able to plan their services in a cost-effective way and will no longer be attuned to the diverse communities they serve.”