The postal affairs minister says he is "extremely confident" the Queen's head would remain on postage stamps if the Royal Mail was sold to a foreign firm.
Ed Davey told the Mail on Sunday he was confident a solution would be found and has said any buyer would have to be "mad" to drop the monarch's image.
Royal Mail is under no legal obligation to show the Queen on stamps but has always done so.
Talks were held with Buckingham Palace after the loophole was spotted.
Mr Davey spoke to the Palace after learning that draft legislation, paving the way for a sell-off, would give the Queen a veto over any use of her image but would not insist her head be shown.
He said he was sure a solution would be found before the Postal Services Bill finished its passage through Parliament.
The Mail on Sunday suggested there was "anger" at the Palace over the omission and suggested it could try to delay the legislation until after the Queen's 2012 Diamond Jubilee.
However, Mr Davey has denied these claims.
The newspaper reported that he queried the lack of specific protection with officials months ago, but was told it was not being sought by the Palace and that dropping the monarch's image would be "commercial suicide".
Unhappy with that answer, the minister said he initiated "positive and friendly" talks with the Palace to decide how to firm up the protection.
"Any company would be absolutely stark staring mad to decide not to have the Queen's head on its stamps," he said, stressing that there was no such guarantee in the previous Labour government's draft Bill.
He said: "I was told we did not need it but I said several months ago I was not happy with that. I'm extremely confident that the Queen's head will remain on our stamps."
Meanwhile, a Palace spokesman told the newspaper there were "no outstanding issues on the Bill from our side".
However, shadow business secretary John Denham argued the legislation was deliberately vague.
He said: "They are not leaving glaring loopholes like this for no reason. They think the fewer strings they attach, the more money they will get from a foreign buyer."
The leading bidders in the sell-off are expected to be German and Dutch operators.