Over 5,000 children and young people are in the care of the Health Service Executive (HSE) the Dáil was told.
Minister of State for Children Brian Lenihan said that almost 4,250 children, 84 per cent, were in foster care.
This represented an increase of 4 per cent on the previous figures.
"This increase in foster care is welcomed and is in line with Government policy. The number of children in residential care has declined by almost 2 per cent, from 527 to 442, between 2003 and 2004."
Mr Lenihan said that the figures showed the critical importance of the foster-care services in the child protection and welfare service.
"Families and family life are very important to all children and the opportunity to experience the qualities of family life is one of the main objectives of the national children's strategy. For those children who cannot be looked after in their own families, and need to be provided with alternative care, foster care provides the best way for them to experience family life.
"The challenge for us is to provide an appropriate response to this vulnerable group of children. This response must respect their rights to a childhood in a secure family environment so that they may fulfil their potential to adulthood."
Introducing the Child Care (Amendment) Bill, Mr Lenihan said it provided that a foster parent, or a relative with a child in their care for five years, might apply for a court order for increased autonomy relating to the child's care.
"Child welfare and protection policy is grounded on the principle that children who cannot, for whatever reason, live with their own family, are provided with an appropriate alternative," Mr Lenihan said.
He added that studies had shown that the development of a child was best achieved in a loving family environment, which foster care could provide children.
Foster care, said Mr Lenihan, was the main form of alternative care provided by the HSE for children in need of care and protection.
Mr Lenihan said that a study had shown that the range of motives of foster carers encompassed altruism and personal aspirations.
Another point of interest was the range of individuals involved in foster care from all branches of society.
"I was pleased to note that most carers found the experience of fostering enjoyable and that any concerns they had prior to fostering had been alleviated.
"The indications are that there are significant benefits to be derived from the fostering experience, for both the children and foster care families.
"This provides us with valuable information for the recruitment of foster carers, with fostering being promoted as having something to offer not only to the children in care but to the foster family themselves."
