A Christian fostering agency is to challenge Ofsted in the High Court over a report that called its Christian ethos "discriminatory".
Ofsted's report was critical of Cornerstone (North East) Adoption and Fostering Service's decision to work only with evangelical Christian carers, and its belief that marriage is between a man and woman.
Despite being rated "Good" in all areas, the fostering agency was downgraded to "Requires Improvement".
A judicial review of Ofsted's actions will be heard in the High Court sitting at Leeds on 6 and 7 May, with lawyers from both sides presenting their arguments by video link.
Cornerstone has denied discrimination, and called Ofsted's requirements a "disproportionate interference" in its human rights and "incompatible" with provisions in the Equality Act 2010.
Sheila Bamber, Chair of Trustees for the agency, said that Ofsted had "failed to have proper regard to the law in reaching its overall judgement".
"Ofsted is not a judicial body and is not equipped to make definitive legal statements about Cornerstone's compliance with the Equality Act 2010 and Human Rights Act 1998. In so doing, Ofsted has acted beyond its remit and has misapplied the law," she said.
Pam Birtle, CEO of Cornerstone, who was herself in care as a child, said: "Cornerstone represents less than one per cent of all of the agencies that are available in terms of the independent fostering sector. And within that sector we are small.
"What we do provide is an opportunity for families to take children who are hard to place and if Cornerstone's service was lost, then that avenue would also be lost."
Cornerstone is being supported in its legal challenge by The Christian Institute.
Deputy Director of the Institute, Simon Calvert commented: "Cornerstone is a small, much-loved Christian agency that achieves excellent results for children and families. Its existence relies on exceptions to equality law passed by Parliament in 2010 precisely to protect the ethos of faith-based agencies like Cornerstone.
"Ofsted is seeking to deny Cornerstone's right to rely on these exceptions, which are used every day by many thousands of religious bodies and places of worship."
He continued: "Evangelical Christians sometimes struggle to get through local authorities' fostering recruitment because they can be uncomprehending of, or even hostile to, their beliefs.
"Cornerstone widens the pool of available adopters by bringing evangelical carers into the system, whilst subjecting them to the same rigorous assessment you would expect from any good agency.
"There are 306 Independent Fostering Agencies in England. Why is Ofsted insisting that non-evangelicals must also be able to use England's only evangelical fostering agency?
"The staff and trustees are effectively being ordered to go against their faith by a government body. Cornerstone is challenging Ofsted in the High Court and hopes success in the case will help protect churches and other religious bodies that rely for their existence on these vital Equality Act exceptions."