An Islamic school in Camden could still be built, with developers set to fight the council in court.
The application was knocked back by council on planning grounds earlier this year, but now the Quranic society will appeal against the decision in the Land and Environment Court.
Gabr El-Gafi from the Supreme Islamic Council says they have no choice but to appeal, because the original decision was racist.
"If the council had refused it on good grounds, nobody can dispute that. But the council rejected it because the people demonstrated against it."
Camden mayor Chris Patterson says they council will stand by its decision.
"I'm 100 per cent confident that council made it's decision based on planning instruments," Mr Patterson said.
"I'm confident we made the correct decision and now as a result we have a legal obligation as a respondent to defend our decision in the Land and Environment Court."