A report by the committee of MPs said the government should support making e-cigarettes more widely used and even consider allowing e-cigarettes on public transport.
Around 2.9 million people in the United Kingdom use e-cigarettes, with 470,000 using them as an aid to stop smoking.
The report claimed that widespread concerns that e-cigarettes acted as a gateway to conventional smoking, particularly for the young, had "not materialised".
A report by the Science and Technology Committee said that rules around e-cigarettes should be relaxed to help accelerate already-declining smoking rates.
Although the report recognised that the long-term health effects of vaping were not yet known, it said e-cigarettes were substantially less harmful than conventional cigarettes because they contained no tar or carbon monoxide.
The report comes days after scientists warned that the perception that e-cigarettes are safe should be treated with caution.
They said ministers should conduct an urgent review to make it easier to get the devices on prescription.
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"The Government should carefully consider the report's recommendations, but any changes to current e-cigarette regulations should be aimed at helping smokers to quit whilst preventing young people from starting to use e-cigarettes".
However chairman of the STC Norman Lamb said that current policy and regulations do not "sufficiently reflect" the lesser harm posed by e-cigarettes than their traditional alternatives. There was no "public rationale" for such putting the two in the same category, said the committee head, Norman Lamb.
The committee said the restrictions were "extraordinary" given those suffering from mental health issues smoke "significantly more" than the rest of the population and are nearly 2.5 times more likely to take up the habit. People with mental health conditions are nearly 2.5 times more likely to smoke compared to the general population.
The report also called for limits on refill strengths and tank sizes, which may put off heavy smokers looking for a strong nicotine hit, to be reviewed.
"It is therefore extraordinary that one-third of mental health trusts ban the use of e-cigarettes completely, while three-quarters of NHS trusts are mistakenly concerned about "second-hand" e-cigarette vapour".
- The government should continue to annually review the evidence on the health effects of e-cigarettes and extend that review to heat-not-burn products.
While there is evidence of children experimenting with e-cigarettes, "regular use in under 18s is really quite low", Hazel pointed out.
MPs want to review a ban preventing such a move - as it would now be considered as tobacco advertising. A Cochrane Review found that 18,000 people in England may have given up smoking in 2015 thanks to e-cigarettes.