Peers last night defeated the Government's bid to repeal Section 28, which bans the promotion of homosexuality in schools.
Voting was 270 to 228, majority 42. The decision, after a stormy and emotionally charged two hour debate, is a major victory for family values campaigner Conservative Baroness Young who has worked tirelessly for months to keep the clause in the Local Government Bill.
It is also the second time this year the Lords has thrown out the government's plans.
But since the spring, the Prime Minister has created around 30 new life peers putting last night's result on a knife edge.
Lady Young said children needed protection from the "appalling" flood of material that would inevitably end up in classrooms if the government got its way.
And she said the House of Lords had a duty to uphold the views of the majority of the British public as shown by the recent private poll carried out in Scotland by Stagecoach chief Brian Souter in which one million people backed his call to keep the clause.
Lady Young said a similar poll in England and Wales would achieve the same result.
But Local Government Minister Lord Whitty condemned Lady Young's efforts to leave the clause in place and said it was against human rights, and minorities deserved to be treated equally as other citizens when it came to local authority spending.
The government last week succeeded in beating off a challenge from Lady Young and her supporters to give sex education guidelines a more pro-marriage stance.
Lord Whitty said the new guidance promoted by the Bishop of Blackburn, the Rt Rev Alan Chesters, would protect children from inappropriate material in the classroom.
He urged peers to accept the realities of life.
The vote was a triumph for Baroness Young, the Tory former Leader of the Lords, who has co-ordinated opposition to repeal.
With the former prime minister Lady Thatcher sitting alongside her in the Lords chamber, she said that she was voicing the concerns of parents throughout the country.
"I am perfectly certain that were we to vote to keep Section 28, the House of Lords would once again be speaking for the overwhelming majority of the British people," she said.
Opponents of repeal argued that retention of Section 28 was essential to protect schoolchildren from being exposed to gay and lesbian propaganda.
However environment minister Lord Whitty said that new guidelines introduced in the government's Learning and Skills Bill would protect children.
He said that retention of Section 28 discriminated against gay and lesbian adults in the provision of services by local authorities.
"Some people in this House may not like it and may feel that the provision of any services to the gay and lesbian community is wrong. "But we on the government side do not accept this," he said.
"We believe that those whose sexuality is different from the majority are citizens of this realm and are entitled from the public authorities of this realm, to equal treatment."
Government supporters in the division comprised 147 Labour peers (one hereditary), 53 Liberal Democrats (four hereditary), 19 independents and others (six hereditary), the five Tory life peers and four bishops.
Without the 92 hereditaries who retained their seats last year under the so-called `Weatherill' deal, the government would have won the vote by 217 votes to 205, a majority of 12.