Chris Ofili's The Holy Virgin Mary

Mr Giuliani has branded the ''Sensation Exhibition'' of contemporary British art an attack on Roman Catholicism and says it is ''sick and offensive''.

He is particularly outraged by a portrait of the Virgin Mary by Chris Ofili which is decorated with elephant dung.

But New York's biggest museums, including the Museum of Modern Art and the Guggenheim, say his threats will do lasting damage to the city's cultural reputation.

And the leaders of two dozen cultural institutions in the city have signed a letter protesting at the funding cut.

The directors of the Brooklyn Museum of Art say the mayor's tactics breach the First Amendment to the US Constitution - depriving them of their right to free expression.

And they say the exhibition will open as planned.

Change of heart

The controversy has also drawn in First Lady Hillary Clinton, who is thinking of running for one of New York's two Senate seats.

Mr Giuliani says the painting is ''blasphemous''

A Democrat, she sides with the museum against Mr Giuliani, a Republican who is also a Roman Catholic.

Mrs Clinton said that while she would personally boycott the show, the museum should not be condemned for staging it.

Mr Giuliani hit back, accusing the first lady of supporting the use of public money "to attack and bash the Catholic religion".

The New York Civil Liberties Union is planning a rally to back the exhibition, while conservative Republicans are planning one against it.

Deal collapses

The legal action came after compromise talks broke down.

The two sides had been close to a deal whereby Mr Ofili's painting would be removed and the gallery's public subsidy cut for the duration of the show.

Hillary Clinton on the campaign trail

But Mayor Giuliani said the agreement collapsed when members of the museum board and staff "got real upset" about the negotiations, and what they saw as a potential threat to the museum's artistic freedom.

Robert Rubin, the chairman of the museum's Board of Trustees, said on Tuesday the lawsuit was "being undertaken in the interests of all public institutions".

The lead counsel representing the city, Michael Hess, countered: "There's nothing in the constitution that says that taxpayers should pay for an exhibition of that disgusting type of paintings."

'No need to defend it'

Mr Ofili, who is a churchgoing Catholic and former altar boy, said the elephant dung was a cultural reference to his African heritage.

He told the UK's Times newspaper: "I don't feel as though I have to defend it. The people who are attacking this painting are attacking their own interpretation, not mine."

The picture depicts Mary with dark skin, African features and flowing robes.

The exhibition also contains controversial works from Damien Hirst, Jake and Dinos Chapman and other young British artists. It includes dead animals and a sculpture made from frozen blood.

The show drew record crowds when it opened in London two years ago, and it has also travelled to Berlin.