Tony Blair has confirmed Catholic adoption agencies will not be exempt from new gay equality legislation, saying there was "no place" for discrimination in Britain.
The prime minister has been under fierce pressure from Catholic and Anglican archbishops not to force religious adoption agencies to conform to new laws prohibiting providers of goods or services discriminating against gay people.
But today he said Catholic agencies would have to adhere to new sexual orientation regulations, which are due to come into effect in April. If they refuse to help gay couples adopt, they will have to close.
However, the rules will not be enforced in the adoption sector until the end of next year, until when they will be able to refuse same sex customers provided they refer them to another agency that will help.
It was thought Mr Blair was personally in favour of an exemption, as was his communities secretary, Ruth Kelly, but several cabinet ministers have been outspoken in their opposition to any kind of watering down of the legislation.
In a statement, the prime minister said that "views obviously differ" on the subject of gay adoption, but said today's proposal was a "way through" that put the interests of children first and "which all reasonable people will be able to support".
He added: "I start from a very firm foundation - there is no place in our society for discrimination. That is why I support the right of gay couples to apply to adopt like any other couple.
"And that is why there can be no exemptions for faith-based adoption agencies offering publicly-funded services from regulations which prevent discrimination."
Labour MP Angela Eagle was one of those fighting the Catholic calls for an exemption, and she welcomed today's proposals, which will now go to a Commons vote.
She told BBC News 24: "I think it's a very welcome decision which means the integrity of our anti-discrimination laws and the protection for citizens are guaranteed, but it's also pragmatic because it recognises the adoption agencies have to have time to adjust."
However, archbishop of Westminster cardinal Cormac Murphy-O'Connor said he was "deeply disappointed" at the proposals.
He added: "We believe there is an urgent task to reach a new consensus on how best the public role of religious organisations can be safeguarded and their rights upheld."
There were fears Catholic adoption agencies, which make up a third of the voluntary sector and often find families for the most hard-to-place orphans, would have no choice but to close if the laws went ahead as planned.
Today Mr Blair said he had asked for regular assessments of the impact of the regulations on adoption and child welfare services, but argued: "I am convinced that this is a package which has the interests of children, and particularly the most vulnerable, at its heart.
"It recognises the hugely valuable role played in adoption by charities and volunteers, including those inspired by religious faith, ensures we do not lose their expertise and services while upholding and extending the government's record against discrimination in all spheres."