Business Secretary Vince Cable has insisted a cap on European Union migrants is "not going to happen" and accused the Tories of being in a "panic" over immigration.
Referring back to previous periods of heightened tensions, including Enoch Powell's notorious "rivers of blood" speech, he warned politicians they had a responsibility to "give the facts" and not "resort" to populist tactics.
It comes after party leader Nick Clegg pledged to block any fresh attempts to curb EU immigration, insisting "this is where we draw the line".
Mr Cable told BBC1's Andrew Marr Show: "There is a bigger picture here. We periodically get these immigration panics in the UK.
"I remember going back to Enoch Powell and rivers of blood and all that. If you go back a century it was panics over Jewish immigrants coming from Eastern Europe.
"The responsibility of politicians in this situation when people are getting anxious is to try to reassure them and give the facts, not panic and resort to populist measures that do harm."
He added: "The 75,000 cap is illegal and impossible to implement in any event. I think what's happening here, the Conservatives are in a bit of a panic because of Ukip reacting in the way they are.
"It's not going to help them, I think, politically, but it's doing a great deal of damage. The responsibility of politicians in this situation is to look at the facts and the simple point is that there is very little evidence of benefit tourism for people coming from Eastern Europe.
"All the evidence suggests that they put far more into the economy in terms of tax than they take out in benefits."
Asked if there was a crisis within the Coalition on the issue, he said: "There is quite a lot of tension around this issue, I don't pretend that it isn't.
" The fact is that we have a job to do to sort out the economy. We are business-like. I think people wouldn't forgive us if we walked away from our responsibilities but there are big differences over fairness, over tax and over immigration and we will argue our corner."
Mr Cable was also critical of the Home Office clampdown on student visas, warning it was harming international business relations.
He said: "What we have got to stop is damaging policies that actually do harm. Frankly, as terms of the controls from outside the European Union, I'm in my department dealing with some of the negative effects of discouraging overseas students, all the visa restrictions which have now become so ridiculously tight we can't get people coming in from China and India to do business."
Earlier this week, Prime Minister David Cameron warned that he would veto further expansion of the union's borders unless reforms were agreed to crack down on "benefit tourism".
A ban on EU migrants claiming out-of-work benefits from the moment they arrive in the UK is also being rushed through Parliament to be in place in time for the January 1 lifting of access restrictions on Bulgarian and Romanian nationals.
Migrants from all EU states will have to wait for three months before applying for jobseeker's allowance (JSA) and other out-of-work benefits.
In an article for The Sunday Times, Mr Clegg said the immigration was "the biggest dividing line in politics today" and branded plans for a cap "arbitrary", "pointless" and "distracting".
He wrote: "Sticking a big no-entry sign on the cliffs of Dover may be politically popular, but at a huge economic cost. What would happen if tonight every European living in the UK boarded a ship or plane and went home?
"Are we really that keen to see the back of German lawyers, Dutch accountants or Finnish engineers? Do we want the NHS to fall over and the City of London to grind to a halt?"
As tensions heighten over the possible "influx" of Bulgarian and Romanians from next month, Bulgaria's president criticised the fear tactics being used by some politicians and warned that Britain could appear isolationist .
Rosen Plevneliev told the Observer: "You see, of course, Great Britain will make its planning and will take its decisions. But some of them could be right, some of them could be wrong. Some of them are bold and some of them are, I would say, not long-term orientated decisions.
"You want to make a plan for a better future for your citizens in Great Britain. In the past 20 years immigrants in Great Britain contributed heavily to its prosperity, and that is a fact. The only thing that is important is not to listen to populist politicians who play on people's fears but to listen to the wise men in Great Britain.
"Listen to the institutions who are giving the facts. University College London has very clear data showing that in the past 20 years immigrants contributed 34% more than they took out. You guys are making profit out of this. So that is really great. Keep it like that."