The Universal Credit system leaves too many UK claimants with children facing a stark choice between turning down jobs or getting into debt, MPs warn.
The Work and Pensions Select Committee says the way parents have to pay for childcare up front, then claim it back afterwards is a "barrier to work".
Committee chairman Frank Field said it was "irresponsible" to put this burden on "struggling, striving parents".
The government said childcare support is more generous under the new system.
But the committee's report on the childcare aspect of Universal Credit is further criticism of the already much-criticised benefit.
The welfare payment, which collapsed six benefits into one monthly payment, is being phased in across the UK.
The report said: "Parents and carers' decisions about whether and how much to work are closely tied to being able to access affordable, good quality childcare.
"The Department for Work and Pensions aspires for 200,000 more people to work under Universal Credit than under the system it replaces, and for people already in work to contribute over 100 million additional hours every year.
"Its success or failure in achieving these aims depends largely on working parents. That means that making childcare payments work is critical to the success of Universal Credit."
But it claims the design of Universal Credit childcare support directly conflicts with the aim of making it easier for claimants to work, or to work more hours.
"Universal Credit claimants must pay for childcare up front and claim reimbursement from the department after the childcare has been provided," the report says.
"This can leave households waiting weeks or even months to be paid back.
"Many of those households will be in precarious financial positions which Universal Credit could exacerbate: if, for example, they have fallen into debt or rent arrears while awaiting Universal Credit payments.
"Too many will face a stark choice: turn down a job offer, or get themselves into debt in order to pay for childcare."
The system of reimbursement was adopted to cut down on fraud and error, and the government says switching to a system of direct payments to childcare providers would require changes to the benefits payment system.
The committee wants direct payments to be adopted, but in the meantime more should be done to help claimants with up-front costs, it says.
Mr Field said: "If the government had set out to design a system to make it harder for parents to get into work, it could hardly have done better than this one.
"It's not just driving parents into despair and debt and creating problems for childcare providers - it's also actively working to prevent the government achieving its own aim of getting more people into work."
A spokesman for the Department for Work and Pensions said: "Working parents can claim back up to 85% of eligible costs, compared to 70% on the old system.
"Universal Credit is a force for good for many, and people are getting into work faster and staying in work longer.
"Recent Budget changes also mean an extra £2bn will be directed to the poorest families."