Two students forced to cover T-shirts depicting Jesus and the Prophet Muhammad have won an apology.
The students were wearing the T-shirts to promote the Atheist, Secularist and Humanist Society at the London School of Economics (LSE) freshers' fair.
The pair launched a formal complaint and the LSE has admitted it had "got the judgement wrong".
The students say they hope this will establish "a resounding precedent for freedom of expression".
In a formal statement, the LSE acknowledges "with hindsight, the wearing of the T-shirts on this occasion did not amount to harassment or contravene the law or LSE policies.
"Members of staff acted in good faith and sought to manage the competing interests of complainant students and yourselves in a way that they considered to be in the best interests of all parties on the days in question."
Security staff threatened Christian Moos and Abhishek Phadnis with expulsion from the freshers' fair in October on the grounds that displaying an image of Muhammad is forbidden under Islamic law and may constitute harassment of a religious group.
They reluctantly agreed to cover the offending garments but later launched a formal complaint.
Prof Paul Kelly of the LSE told BBC Radio 4's Today programme: "The law in this case was complex and given the complaint, with the backing of solicitors, looking for judicial review, we had to take legal advice.
"This was always a grey area. So yes, I got the judgement wrong but it was a complex decision and it's important to make that clear."
Prof Kelly added that in the UK there was no US-style First Amendment guaranteeing freedom of speech "without qualification".
He said the university had to weigh up the Human Rights Act, the 2010 Equality act and the 1986 Universities Extension Act.
"Each one of those laws is perhaps clear, but when they all come together we have to make judgements.
"In general our attitude is very tough on promoting free speech at public events, lectures and student societies.
"This was a complex event because it was a welcome event. It's when students from 130 countries arrive in the UK all together.
"Yes, freedom of speech still applies there, but it wasn't the same as us objecting to a student society event or a public lecture, or as Christian, as he did later, host an event where students wore the T-shirts. That's fine".
Mr Moos said the university had not provided any evidence of complaints from students and the comments they had themselves received on the day had all been positive.
"You are judging us on something for which there is not evidence," he said.
He argued that in fact the decision should have been straightforward. "It was simply two students exercising their right to freedom of expression that they have as much as any other student who might wear religious symbols or T-shirts expressing their faith.
"It was extremely shocking that the LSE still tries to justify their decisions.
"If somebody is wearing a racist or violent or gory T-shirt, that would be a totally different situation."
He said their T-shirts did not offend or harass anyone, not even by the most stringent standards.
"What I would ask Paul is, 'Will you actually apologise for the actual harassment we have suffered?' That's the issue at stake. You have apologised for the decisions made but not for harassing, humiliating and intimidating us.
Prof Kelly said he was sticking with the apologies already issued to the two students concerned.