The decision to allow a teacher who described immigrants as "filth" and "savages" to return to the classroom has been condemned by teaching unions as "perverse".
Adam Walker, a BNP member who stood for the far-right party at the general election, posted a series of comments about "filth from other countries" on a website while he should have been supervising pupils.
But in a highly contentious decision, the General Teaching Council for England (GTC) said he had not broken any rules to bar him from the profession.
Mr Walker, who was a teacher at Houghton Kepier Sports College, County Durham, used a school laptop to post his views.
At the end of a drawn-out case the GTC said it was "troubled" by Mr Walker's postings, but found they were not "suggestive of intolerance".
Mr Walker was found guilty of a lesser charge of making personal use of a school computer during lessons. He was given a conditional registration order, which means he is still able to apply for teaching jobs.
Mr Walker's posts, made under the name Corporal Fox, included: "Our country is fast becoming a dumping ground for the filth of the third world. And all we do is sleep.
"If we do not wake up and get a grip soon then the country we have fought and died for and cherish so much will itself be turned into a third world cess pit ...
"We have enough on our plates sorting out our own home grown scumbags and scroungers without allowing filth from other countries to come here and destroy us."
In a further posting he said that soldiers should be pulled out of Iraq to protect the UK's borders. "This will prevent our country from being over-run by third world savages, the likes of which we have seen murdering our people and destroying our way of life."
Mr Walker, who said he had never discussed his political views with pupils, quit his job claiming he was being targeted for his beliefs. There is no ban on BNP members being teachers.
The GTC said Mr Walker's views contained offensive terms and "might be considered racist". But it found that as the posts did not "deny or refuse to others the right to dissent" they were not intolerant.
Chris Keates, general secretary of teaching union the NASUWT, described it as "an absolutely staggering judgment".
"The GTC's code of conduct requires teachers to 'demonstrate respect for diversity and promote equality' but the decision makes a mockery of the code," she said. "The only thing of any worth with the GTC was its regulatory function. Now it's failing in that regard."
Christine Blower, general secretary of teaching union the NUT, described the decision as "perverse".
The GTC said it could not comment on individual cases.