The discussions come after it emerged that criminals were able to smuggle the phones into prisons.
Speaking to the BBC, a government spokesman said that it was discussing the issue with the National Trading Standards Board (NTSB) and the Serious Organised Crime Agency.
The NTSB has asked retailers to stop selling the phones until a decision has been made. Among the retailers carrying the phones – which are often described as the world’s smallest mobile phones – are Amazon and eBay.
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According to reports, several of the Chinese-made phones were advertised with criminals in mind.
Possessing a mobile phone in prison is a criminal offence in the UK.
They are designed to resemble the fobs used control remote central locking and alarms in high end cars, like BMW, Volkswagon, Bentley, Audi and Porsche.
A spokesperson for the UK Society of Motor Manufacturers and Traders told the BBC that it believes the devices are being made without their members’ permission.
According to the prison service, efforts have already been stepped up to detect the phones.
“A range of techniques - including body orifice security scanners and high-sensitivity metal detectors - has seen the [overall] number of recorded seizures increase,” he told the BBC.
“We’re now working closely with the Serious Organised Crime Agency and Trading Standards to remove these small mobiles from sale in the UK, as well as legislating to block phone signals in prisons.”
SOCA has told car makers they will need to take action. It said it had previously warned them about the issue.
"“By issuing alerts that warn of criminal dangers and threats, SOCA seeks to arm specific organisations and sectors with information and advice they can use to protect themselves and the public,” explained a spokesman.
“In this case SOCA assisted the prison service and the National Trading Standards eCrime Centre by issuing an alert to car manufacturers and online retailers earlier this year to make them aware of the issue so they can consider taking copyright infringement action against those selling these phones.”