Former Archbishop of Canterbury George Carey delayed a "proper investigation" into a senior priest's paedophile crimes for two decades by failing to pass information to police, an inquiry heard.
A lawyer for some victims of Peter Ball, the disgraced former Bishop of Lewes and Bishop of Gloucester, made the claim to Dame Lowell Goddard's public inquiry into child sex abuse.
Ball, 84, was jailed for 32 months in October 2015 after pleading guilty to a string of historical sex offences.
But 22 years previously, in 1993, he was investigated and let off with a caution for gross indecency by police after abusing a trainee monk.
Richard Scorer, who represents 17 victims, made the claim about Lord Carey while an application for three of them, all men, to be "core participants" in the inquiry at a preliminary hearing in the Royal Courts of Justice.
He said one of the men, known as A13, complained to Lord Carey in 1992, when the latter was the most senior figure in the Anglican Church.
Mr Scorer said: "A13 can tell the inquiry about a very detailed complaint he made to Archbishop George Carey in 1992, reporting Peter Ball's behaviour ... years previously.
"We believe that the Archbishop of Canterbury failed to pass that information on to the police and is one reason, we believe, a proper investigation of Peter Ball's behaviour and abuse was delayed by over 20 years."
One strand of Dame Lowell's wide-ranging inquiry will examine child sex abuse by members of the Anglican Church and ecclesiastical authorities' reaction and response to it.
It is looking in detail at allegations involving the Diocese of Chichester, in which Ball worked as Bishop of Lewes from 1977 to 1992, when he took the position in Gloucester.
Lord Carey has previously denied being involved in a cover-up.
After the former bishop was jailed at the Old Bailey last year, the peer said: "I greatly regret the fact that, during my tenure as Archbishop of Canterbury, we dealt inadequately with Peter Ball's victims and gave too much credence to his protestations.
"Allegations by some that my actions amounted to a cover-up or collusion with the abuser are wrong. I have always insisted upon the highest standards of holiness of life from all who are ordained."
While Bishop of Lewes, Ball hand-picked 18 vulnerable victims to commit acts of "debasement" in the name of religion, such as praying naked at the altar and encouraging them to submit to beatings, his trial heard.
Despite complaints, Ball was never charged and worked as a priest in Truro after he accepted the caution.
Ben Emmerson QC, counsel to the inquiry, told the preliminary hearing it would examine allegations of "inappropriate attempts by persons of prominence to interfere in the criminal justice process when Peter Ball was first accused of criminal acts in 1992".
He described Chichester as a diocese that was "notable for a high rate of child sex abuse complaints", with the problem reaching "deep into Chichester Cathedral" and associated bodies.
Mr Emmerson said: "The evidence which is so far available suggests many incidents of sexual abuse by priests or others in positions of power in the Anglican church over a long period of time.
"There is reason to believe that the Anglican church ... in the past produced a picture that was less than comprehensive."
Speaking outside the hearing, the Rt Revd Paul Butler, Bishop of Durham, the C of E's safeguarding lead, said the church would co-operate fully with the inquiry.
He said: "It goes without saying we will examine lessons learnt from the inquiry's findings and believe it will play a vital part in our commitment to making the Church a safer place for all."
The inquiry, expected to take five years, will look at various institutions and public figures and scrutinise the police, Crown Prosecution Service, Labour Party and the security and intelligence agencies, as well as people of public prominence associated with Westminster.