Clarification had been sought from the High Court over whether married Christian couple Eunice and Owen Johns could continue to foster children after Derby City Council blocked their application because the couple had said they would not be willing to promote the practise of homosexuality to a young child.
Both parties wanted clarification on whether the couple should be excluded from consideration as foster parents under Britain's equality laws because of their Christian beliefs concerning marriage.
The landmark ruling, handed down by judges Lord Justice Munby and Justice Beatson, suggested Christians with traditional views on sexual ethics would not make suitable foster carers.
The judges stated that if children were placed with parents who have traditional Christian views "there may well be a conflict with the local authority's duty to safeguard and promote the welfare of looked-after children".
They noted that there was a tension between the equality provisions concerning religious discrimination and those concerning sexual orientation, but ruled that in regards to fostering, "the equality provisions concerning sexual orientation should take precedence".
The judges argued that there had been no religious discrimination against the Johns because they had been excluded from the fostering application process as a result of their moral views on sexual ethics rather than their Christian beliefs.
They added that the right to manifest religious belief outlined in the European Human Rights Act was only a "qualified" right, particularly where it concerned potential carers who wish to manifest a belief that is "inimical" to the interests of children.
The ruling also implicitly upheld a submission from the Equalities and Human Rights Commission stating that children risk being "infected" by Christian moral beliefs.
There is now little chance that the Johns, who have previously fostered 15 children, will be able to foster children unless Derby City Council reverses its decision to halt their application process.
The Johns spoke of their disappointment in a joint statement following the ruling.
"We wanted to offer a loving home to a child in need but because of this ruling we are unsure how we can continue the application process," they said.
"We have been excluded because we have moral opinions based on our faith, and a vulnerable child has probably now missed the chance of finding a safe and caring home.
"We do not believe that our ordinary Christian moral views are infectious, contrary to what the Equality and Human Rights Commission believes.
"Being a Christian is not a crime and should not stop us from raising children."
The Christian Legal Centre, which supported the Johns' court bid, said significant areas of public life were now becoming "out of bounds" to Christians who do not want to compromise their beliefs.
It said that the outcome of the Johns' case was just the latest in a series of recent rulings against Christians and further evidence of a "hostility" in the judiciary towards Christians.
CLC director Andrea Minichiello Williams said Britain was now leading Europe in intolerance against religious beliefs.
She expressed her concerns for the future of Christians living in Britain.
"If Christian morals are harmful to children and unacceptable to the state, then how many years do we have before natural children start being taken away from Christians?" she said.
"There is a great imbalance in the law at the moment, resulting in ordinary people suffering.
"The situation must be addressed by Parliament as the judiciary have failed to stand for civil liberties but have capitulated to the agenda of the homosexual rights lobby.
"We cannot have a society where you are excluded just because you don't agree with the sexual ethics of the homosexual lobby."
The CLC said it will now press Prime Minister David Cameron to launch an independent inquiry to look into whether or not it is lawful for Christians to be excluded from the foster care system on the grounds of their religious beliefs.