Bahrain has been strongly criticised by international human rights groups for its crackdown, which has included requesting troops from neighbouring Saudi Arabia to help put down protests against the ruling family.
Crown Prince Salman bin Hamad al-Khalifa's visit to London comes after he declined an invitation to the wedding of Prince William and Princess Catherine last month amid fears that his presence might act as a distraction.
"The prime minister raised concerns about the situation in Bahrain and stressed the importance of the government moving to a policy of reform rather than repression," said the Downing Street statement.
The Conservative party leader praised the prince's efforts to "achieve political and economic progress" and vowed to back attempts "to return Bahrain to a credible long-term process of reform."
Asked why Britain was welcoming the crown prince, when British forces were involved in military action to prevent the repression of protesters in Libya, a government spokesman said: "We said all along that the situation in different countries is different.
"There are different circumstances and we need to reflect that. Clearly, in all cases we would support reform and dialogue," he added.
Denis MacShane, a former junior foreign minister from the opposition Labour party, earlier Thursday said Cameron should not be "rolling out the red carpet for Bahrain's torturer-in-chief".
"We have well-documented reports of torture, including the torture of women doctors, killings, and even the Saudis sending tanks across to Bahrain to crush the protests in the time-honoured fashion of the Soviets in Prague or Budapest," said MacShane.
Amnesty International UK director Kate Allen called for Cameron "to make it absolutely clear that the Bahraini government must end its relentless crackdown on human rights."
Britain has close trade links to Bahrain, but as protests began sweeping the Persian Gulf this year, London revoked licences for the export of some security equipment to the country fearing it might be used to suppress protests.
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