A Catholic adoption agency has been barred by the Charity Commission from restricting its service to heterosexual couples.
Catholic Care, in the diocese of Leeds, wanted to amend its charitable objectives to avoid equality legislation which requires it not to discriminate.
The decision came after a High Court order in March which required the Charity Commission to reconsider its decision not to let the agency change its constitution.
Under the 2005 Sexual Orientation Regulations, all businesses and services must not discriminate against gay people.
Catholic Care wanted to take advantage of a clause which allows charities to discriminate if their aims are to serve people of a particular sexual orientation. In practice, one example is gay charities being allowed to refuse employment to straight people.
It argued that if it catered to gay couples, it would lose its funding from the Catholic Church and be forced to close. It also claimed that gay couples were not harmed by its position as they can approach other adoption agencies.
However, the Charity Commission ruled that the charity had not shown enough evidence to be permitted to amend its objectives.
In its decision, the commission said that it was in children's benefit to have as wide a pool of potential adopters as possible and cited a High Court judgment which said that respect for religious beliefs was not a justification to discriminate on the grounds of sexual orientation.
Catholic Care argued that it acts as a service for children who are particularly damage or hard to place with adoptive parents. In the ruling, the commission said that other local channels would fill the gap and that the charity currently only provides for an average of ten children per year.
In past submissions, Catholic Care has said that it will close rather than cater for gay couples and lose the financial support it gets from the Catholic Church.
The majority of Catholic adoption agencies in the UK have closed or cut their ties with the church since the two-year window for them to comply with the law passed.
Catholic Care could not be reached for comment yesterday.
Andrew Hind, the chief executive of the Charity Commission, said: “In certain circumstances, it is not against the law for charities to discriminate on the grounds of sexual orientation.
"However, because the prohibition on such discrimination is a fundamental principle of human rights law, such discrimination can only be permitted in the most compelling circumstances.
"We have concluded that in this case the reasons Catholic Care have set out do not justify their wish to discriminate.”
A spokesman from gay charity Stonewall said: "We welcome the Charity Commission’s second refusal to allow Catholic Care special dispensation to discriminate against gay couples.
"Stonewall’s recent research on children with gay parents shows how their families are as loving and committed as any. A wider pool of potential loving parents is in the best interests of the children waiting for adoption."