The decision overturns last year’s finding by a High Court judge that inspectors from the country’s school watchdog Ofsted were wrong to penalize the co-ed Al-Hijrah school in Birmingham.
The inspectors had previous reported that the segregation of the pupils left them “unprepared for life in modern Britain.”
It was also reported that inspectors found “offensive” books in the school’s library that advocated wife beating and forced sex – local media reported.
The school is not challenging the claims laid against it regarding the books.
The three judges ruled unanimously on Friday that Ofsted’s chief inspector Amanda Spielman be allowed to challenge the previous decision by Mr.Justice Jay in the High Court.
Ofsted grades schools based on a number of criteria that include the students achievements and the overall teaching standards, but also the environment in which children are educated.
Friday’s court ruling means Ofsted will be allowed to mark down other schools which operate a segregation policy, whatever the faith.
The appeal judges said: “It is common ground that the school is not the only Islamic school which operates such a policy and that a number of Jewish schools with a particular Orthodox ethos and some Christian faith schools have similar practices.”