The ruling is the latest event in an ongoing saga in Ofena, the village in central Italy, which is home to Adel Smith, leader of Italy's 700,000-strong Muslim community.
The story has elements of farce, but it can be seen as a test case in a traditionally Catholic country trying to cope with the realities of third world immigration and multi-culturalism.
Two years ago, Mr Smith (who owes his name to a Scottish ancestor) asked the head of the state primary school where he sends his two children to remove the crucifix from their classroom, on the grounds that it was offensive to non-Christians.
The head of Antonio Silveri elementary school agreed, but other parents protested and the crucifix made a quick comeback.
Meanwhile, Mr Smith became something of a celebrity, appearing on TV talk shows and trading insults with other participants. One of these appearances led to an open brawl.
In September this year he put up a notice in the classroom which read "Allah is great". This was taken down almost immediately. Mr Smith's response was to send his children to school with a text from the Koran sewn on the back of their school overalls and to take the matter to court.
Although crucifixes in schools are sanctioned in 1920s legislation, and are particularly common in primary schools, the judge accepted the complaint because of the "profound cultural transformation currently taking place in the country".
The decision has been criticised by politicians from all sides of the political spectrum. The minister of justice has ordered an investigation, while the education minister has vowed the crucifix will be back.
Even the secretary of the Union of Islamic Communities believes that the ruling is a mistake, because it can have "a negative effect on relations between Christians and Muslims".
The issue may be gaining such attention because Italy has only recently begun to acknowledge large non-Christian groups in its society. Its population of 57 million includes about 1.2m legal immigrants. Thousands of illegal immigrants arrive every year.
Immigrants are likely to make up a greater part of the population in future. As the birth rate declines business leaders say more newcomers are needed.
So far no crucifixes have been removed from the Ofena school. Local education board official Nino Santilli said he had not received an official order, and he had no plans to take down the crosses yet. "It's more than 2,000 years that our people and our country have gravitated around the culture of Christianity and the crucifix," he said. "And that goes for non-believers too."
The Vatican newspaper L'Osservatore Romano responded on Monday by publishing a front-page image of Christ on the crucifix juxtaposed with a 1998 comment from Pope John Paul II.
"Many things can be removed from us Christians. But the cross as a sign of salvation we will not let them take," the pope said. "We will not allow it to be excluded from public life."