Campaigners hope the decision will help improve promotion prospects for female teachers and reduce gender stereotyping in pupils' careers advice.
Ministers had planned to exempt schools from key parts of the Equality Bill because they were worried about the implications for single-sex schools and lessons.
The Bill has been described by the Equal Opportunities Commission as the most significant piece of anti-discrimination legislation for 30 years.
Meg Munn, junior minister for women and equality, told Parliament that education ministers agreed to extend the legislation.
The U-turn follows pressure from the Department for Trade and Industry, the EOC and teaching unions.
Steve Sinnott, general secretary of the National Union of Teachers, wrote to Ruth Kelly, the Education Secretary, in November, warning that the Government was missing an opportunity to tackle sexism in schools.
Research for the Department for Education and Skills showed young women who leave school to do workplace training earn about pound;40 less per week than their male counterparts. Campaigners said this is because careers advice tends to steer girls towards traditionally female and low-paid jobs such as hairdressing.
Male primary teachers are about four times more likely than women to become heads, and male secondary teachers are three times more likely to get the top job. A study published by the National College for School Leadership in March found that half of women secondary heads had to fight sexism to win promotion.
Reasons given to women who failed to get headships included wearing too much nail varnish or gold jewellery and being too short.
Local education authorities that provide free buses only for the children of religious families could be challenged by MPs.
The House of Commons joint committee on human rights said the proposed Equality Bill, which offers faith school exemptions such as free travel, is unfair.
A survey by the National Secular Society this month found that all but five of the 150 LEAs in England offer some free transport to Christian, Muslim, Jewish, Sikh or Hindu parents who want to send their child to a religious state school.
But no authorities offer the same right to parents who live close to a faith school but wish to send their child to a school without a religious affiliation.
In a report, the joint committee on human rights said: "We are concerned that this current Bill does nothing to dispel, and may reinforce, the apparent misapprehension of some LEAs that it is permissible to discriminate against children of parents with non-religious convictions."
Ms Munn told a Commons committee that, in light of the report, the wording of the Bill would be strengthened to close any loophole that discriminated against non-believers.