Controversial plans that would force parents to send their children to a faith school have been put on hold following complaints about the expansion of religious education.
Swanage First School in Dorset had been identified for closure, even though it is the only non-religious school in its area.
If the closure had been approved, it would have been the first time that an area with more than one school had failed to offer a non-faith choice.
The plan was greeted with vociferous complaints from the community and secular campaigners, who claimed it was denying parents choice.
Jim Knight, the former schools minister and local MP, also spoke out against the proposal.
He said it was important for parents to have the "fundamental choice" of whether they wanted to give their children a faith-based education.
Councillors had wanted to close Swanage First School as part of a large- scale reorganisation of its schools.
The authority wants to phase out a three-tier system - first, middle and upper schools - and replace it with primary and secondary schools in a bid to cut surplus places.
Under its original plans, Swanage First and St Mark's CofE First School would have been closed and replaced with a new primary. But complaints were raised when the council said the new school would "respect the faith tradition" of St Mark's.
The National Secular Society threatened the council with a legal challenge under the Human Rights Act for contravening parents' rights to educate their children in line with their beliefs.
The British Humanist Association said that closing the only community school "gives the lie to the government rhetoric about choice".
Parents and staff raised wider concerns that the closure of the school, rated as outstanding by Ofsted, would damage the community and make it more difficult for children to access amenities.
Following the protests, the council has sent its plans for Swanage back to the drawing board. It intends to push ahead with the reorganisation to cut surplus places but has conceded there were "a lot of concerns" over the proposals.
"This is a very sensitive and emotive issue," said Toni Coombs, cabinet member for children's services.
"We have a serious problem on our hands with pupil numbers in Purbeck falling. If we do nothing, we will end up with schools being forced to close because they will not be able to survive."
She added: "I believe that a move to a two tier system is the right way forward, but it is vital we understand the impact of our decisions on local communities, and there is more work to be done."
The council will now draw up new proposals, which will be open to public consultation at the beginning of 2010.
A final decision is expected by the summer.
Keith Porteous Wood, director of the National Secular Society, said the society's lawyers would continue to monitor the council in case it risks, in their view, breaking European legislation.
"Even community schools are required to hold daily acts of worship and give religious education lessons," he said.
"So if there is only to be one kind of school it should be a community one, especially after a century of decline in church attendance."