Speaking in the House of Commons, the Chancellor of the Exchequer said such arrangements already exist in the US and Scotland.
The Labour MP for Bishop Auckland, Helen Goodman, asked Mr Osborne whether he knew of a report showing liberalising Sunday trading laws would hit smaller shops, causing thousands of job losses.
The Chancellor answered: "It has been the case that when we have extended opening hours we have not seen not a displacement of jobs, but an increase in jobs. That is the assessment from the retail industry.
"Of course, these arrangements exist in Scotland, in many European countries and in the United States. Many of those are countries with strong Christian faiths, so I do not think there is a contradiction there.
"We cannot in this House constantly say that we worry about our high street and then not allow high street stores to open on the day when the biggest level of internet shopping takes place.
"This is one of the answers to helping our high street. It is not the only one, but it is an important one."
Meanwhile, the Bishop of St Albans has written a letter warning against the social cost of liberalising Sunday trading laws.
The Rt Revd Dr Alan Smith claims the change would see shop staff missing out on family time and needing to pay for childcare on Sundays.
Writing in The Times, he said: "The proposals will further disrupt the rhythms of community life that are integral to the common good and the space for shared time and activities this is central to human flourishing."
The House of Commons is due next week to vote on the plans, which are thought to be the biggest shake-up in Sunday trading laws in two decades.
The Scottish Nationalist Party announced earlier this week it was withdrawing its opposition to the proposals which are now expected to clear Parliament.