A Devon town council acted unlawfully by summoning councillors to attend prayers before its meetings, the High Court has declared.
Mr Justice Ouseley ruled that there was no lawful authority to require prayers as part of council business under section 111 of the Local Government Act 1972.
However, he added that prayers could be said as long as councillors were not formally summoned to attend.
The judgement is being seen as a test case which could affect local councils across England and Wales, and have implications for other public bodies.
Mr Justice Ouseley ruled that the prayers as practised by Bideford Town Council had not been lawful because there was no statutory power permitting them to continue.
The case against Bideford Town Council was brought by the National Secular Society (NSS) local councillor Clive Bone, who is an atheist, complained that his right not to have religion forced upon him in a civic body was being violated.
The NSS argued that the summons to pray breached articles 9 and 14 of the European Convention on Human Rights, which protect an individual's right to freedom of conscience and not to face discrimination.
But the case was not won on human rights grounds. It was decided but on a point of statutory construction of local government legislation.
Some socially conservative Christian groups are already denouncing the High Court judgement in terms of it being "anti-Christian" and "discrimination against the religious", while some secularists have been talking about a "ban" or "prohibition" on prayer.
But the Christian thinktank Ekklesia points out that these are both misinterpretations, and points out that the full judgement had not been made publicly available when some of the earlier responses were made.
"The judgement on the Bideford Council case is about preserving freedom of religion and belief in public life, not curtailing it," said Ekklesia co-director Simon Barrow. "It does not ban prayer. What it says is that is it is not lawful for a local council to make it a compulsory part of minuted council business and to summons councillors, whatever their beliefs and outlooks, to attend. That is quite different."
"Prayer is the freely offered activity of believers. Requiring those who do not believe to pray, and doing so in public bodies, is something which violates the nature of prayer and which many believers will feel offends free Christian and religious conscience.
"Christians and others are free to go on praying for public bodies, for justice and peace, and for many other vital concerns. But they are not free - and nor should they want to be - to compel others in this matter."