A Catholic adoption service won a court ruling on Wednesday requiring the Charity Commission to reconsider whether it is entitled to an exemption from anti-discrimination rules.
Catholic Care, based in Leeds, had argued that it could not continue to operate if it was compelled to consider gay couples as adoptive parents.
Other Catholic agencies have either withdrawn from placing children or have cut their ties with the church since the British government imposed the anti-discrimination rule in 2007.
Justice Michael Briggs ruled that Catholic Care's work with children whom other agencies could not place was a benefit to the public, despite its policy of refusing gay couples.
The judge said Catholic Care handled about 10 adoptions a year of hard-to-place children who had not found homes through other agencies.
"But for Catholic Care's work in that field, those children would therefore not have been adopted that year or, probably, at all," Briggs said.
He noted that the selection of adoptive parents was made by the local government authority, not by Catholic Care.
Terry Sanderson, president of the National Secular Society, called the decision alarming.
"If the Charity Commission reverses its previous decision - as the court is asking it to - we can look forward to a tidal wave of similar challenges from bigoted Catholic organisations who are determined not to accord any rights to gay people at all," Sanderson said.
Last month, Pope Benedict XVI said he was concerned that British equality rules could be unfair to some religious organisations.
"Your country is well known for its firm commitment to equality of opportunity for all members of society," he said in an address to English bishops. "The effect of some of the legislation designed to achieve this goal has been to impose unjust limitations on the freedom of religious communities to act in accordance with their beliefs."
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