Neil Robertson, aged 41, a music teacher at St Thomas Aquinas Secondary in Glasgow's west end, was the first in Scotland to use new laws banning discrimination on the grounds of religious belief before a tribunal.
Glasgow City Council conceded it failed to follow its own procedures properly during the interview process but denied religious discrimination.
After Mr Robertson lodged his complaint, the interview process was rerun but he was again unsuccessful.
One of the first interview panel members, Desmond McLean, faculty head of music, art and drama at another Glasgow secondary, had insisted there was no question of religious bias and said Mr Robertson had not performed well at interview. His answers lacked substance and depth.
Mr Robertson was previously assistant principal teacher of music at St Thomas Aquinas but that post disappeared in the post-McCrone shake-up. He was the only candidate to be interviewed for a new post as head of the faculty of performing arts, which included music, drama and PE.
The interview panel was unanimous in rejecting him.
The tribunal heard that certain posts at denominational schools were subject to the Catholic Church approving appointments on the basis of candidates' beliefs, lifestyle and morality. But faculty head was not one of them.
Mr Robertson's solicitor, Rod McKenzie of Glasgow law firm Harper MacLeod, confirmed that the complaint had been withdrawn. "While Mr Robertson has many reservations about what had been done and why it had been done, he was satisfied the reason was not because he wasn't a Catholic," Mr McKenzie said.