A federal appeals court panel in Philadelphia ruled yesterday that the Pentagon cannot block funding to universities that restrict military recruiters’ access to students, delivering a major victory to gay rights activists who have sought to limit the armed services’ presence on campuses.

The ruling is the most significant development to date in a 14-month-long legal battle over the Solomon Amendment, a 1996 statute which the Pentagon invoked two years ago when it threatened to cut all federal research funding to Harvard unless the Law School gave the armed services broader access to campus recruiting resources.

A 25-year-old Law School policy requires employers who recruit on campus to sign a pledge that they will not discriminate against employees based on sexual orientation. The military—which requires the discharge of openly gay servicemembers under the “don’t ask, don’t tell” protocol—refused to sign the Law School’s pledge. Faced with the threat of losing hundreds of millions of dollars in federal research grants, the Law School modified its nondiscrimination policy in 2002, allowing the military to recruit on campus.

By a 2-to-1 vote yesterday, a Third Circuit panel ordered a lower court judge to issue a preliminary injunction barring the Pentagon from threatening universities with funding cuts.

The two-judge majority found in favor of the Forum for Academic and Institutional Rights (FAIR), a coalition of law schools who argued that the 1996 statute violates the First Amendment. The judges wrote that law schools have a constitutional right to spread their message of “fairness and justice” without undue government interference.

While the circuit’s jurisdiction covers only Delaware, New Jersey and Pennsylvania, FAIR President Kent Greenfield said he expects the injunction to affect law schools nationwide.

“This is as broad a victory as we could have hoped for,” said Greenfield, a law professor at Boston College.

The panel ruled “the government has failed to proffer a shred of evidence” that the Solomon Amendment enhances national security, a prerequisite for the statute’s constitutionality. If anything, the panel argued, the policy “generate[s] ill will toward the military” and “actually impedes recruitment.”

But government officials said that limits on campus recruiting could prevent the armed services from attracting highly qualified attorneys.

“The United States continues to believe that the Solomon Amendment is constitutional,” Justice Department spokesman Blain Rethmeier said yesterday. “We are examining the opinion and considering our options.”

The Justice Department can still pursue several avenues to prevent the injunction from taking effect, said Howard J. Bashman, an appellate attorney who represented three law school veterans’ groups that filed friend-of-the-court briefs supporting the government’s position.

The Justice Department can ask the full Third Circuit to re-hear arguments in the case, and Bashman said the court would likely be sympathetic to the request. Alternatively, the government could appeal the Third Circuit ruling directly to the U.S. Supreme Court. Even if the Third Circuit and the Supreme Court do not accept the government’s appeal, the ruling would not go into effect for at least seven weeks “as a matter of course,” Bashman said.

The case would then be sent back to District Court Judge John C. Lifland, a 1957 Harvard Law graduate who rejected FAIR’s motion for a preliminary injunction last November.

After that ruling, a majority of the Harvard Law faculty filed a friend-of-the-court brief urging the Third Circuit to overturn Lifland’s decision.

Bloomberg Professor of Law Martha L. Minow, who spearheaded the filing of the friend-of-the-court brief in January, said that the Third Circuit panel did not use the Harvard faculty’s specific arguments in yesterday’s decision.