14-year-old Sarika Watkins Singh was excluded from Aberdare Girls' School in South Wales in November 2007, for refusing to remove a wrist bangle which is central to her faith.
Justice Silber in the High Court said the bangle - known as the kara - was a symbol of her Sikh faith and not a piece of jewellery.
"The school is guilty of indirect discrimination under race relations and equality laws."
As a sequel to the judgment, Sarika will be returning to the school in September wearing the Kara, a slim steel bracelet. Sarika said: "I am overwhelmed by the outcome and it's marvelous to know that the long journey I've been on has finally come to an end. I am so happy to know that no-one else will go through what me and my family have gone through.
"I just want to say that I am a proud Welsh and Punjabi Sikh girl." Her mother, 38-year-old Sinita said: "We are over the moon. It is just such a relief." Her lawyers had told Justice Silber that the Kara was as important to her as it was to England spin bowler Monty Panesar, who has been pictured wearing the bangle.
Image: Sarika Watkins Singh wearing her bangle with her mother Sanita in London.
Photograph: Daniel Berehulak/Getty Images