Mr Balls has written to Sir Roger Singleton, the Government's chief adviser on children's safety, to clarify the issue and consider whether the law should be changed.
The question was raised in the House of Commons last week by Labour MP Ann Cryer, who said there should be no exemption to the law for teachers in 'madrassas or other religious schools'.
Corporal punishment is banned in all maintained and full-time independent schools, but teachers in part-time educational and learning settings - for example, where children receive religious instruction at the weekend - have the same rights as parents, which means that they can use 'the defence of reasonable chastisement' and give children a mild smack.
In his letter to Sir Roger, Mr Balls wrote that the Government 'does not condone smacking children and we want to progress to the point where smacking is seen as unacceptable by the vast majority of parents, and is used only as a last resort, if at all.'
However, he added that the Government did not believe in a full ban on smacking, because it did not want to 'criminalise decent parents who decide to administer a mild smack'.
The debate follows a new clause in the Children, Schools and Families Bill which has been proposed by MPs David Laws and Annette Brooke, who want to see the law on smacking changed to limit the availability of the defence of reasonable chastisement to persons with parental responsibility, rather than parents and persons acting in loco parentis.
In a letter to Ms Cryer, schools minister Vernon Coaker put the issue in context and said he was concerned that there could be unintended problems to the proposal, for example, 'fathers who care for their child but do not have parental responsibility' or grandparents, who could then face a ban on smacking.