The BBC's Joshua Rozenberg: "Service chiefs will now draw up a code of conduct"

UK Defence Secretary Lord Robertson, who is set to become Nato's secretary-general, accepted the judgment and said ministers would consult with service chiefs on how to put it into practice.

Three ex-servicemen and a former RAF nurse told the court investigations into their homosexuality and their subsequent sackings violated their human rights.

Duncan Lustig-Prean: "No longer will people have to endure instrusive investigations because of their private lives"

Former RAF nurse Jeanette Smith, ex-RAF administrator Graeme Grady, ex-Royal Navy lieutenant-commander Duncan Lustig-Prean and ex-naval rating John Beckett took their case to the Strasbourg court after it was rejected by the Appeal Court in London.

The European judges declared unanimously that such a bar on entry into the army, navy and air force was illegal under the European Convention on Human Rights, which safeguards an individual's right to privacy.

The government's approach was based on a 1996 report by the Homosexuality Policy Assessment Team.

The judges said: "Insofar as the views of personnel outlined in the report could be considered representative, those views were founded solely on the negative attitudes of heterosexual personnel towards those of homosexual orientation."

Sir Anthony Farrar-Hockley and Gulf War veteran John Nicol discuss the ruling

They said the physical capability, courage, dependability and skills of homosexual personnel were not in question.

The position of the Ministry of Defence (MoD) had been that gays in the military were bad for morale and vulnerable to blackmail from foreign intelligence agencies.

About 60 homosexual servicemen are forced to leave the service every year.

The BBC's Legal Affairs Correspondent Joshua Rozenberg: "It's clear, it's unanimous, it's far-reaching"

Shadow defence spokesman Richard Ottaway suggested Britain might seek an opt-out from the decision.

He said the opposition respected and supported the decisions of the court, but did believe all of them were correct.

Mr Ottaway told BBC Radio 4's Today programme: "The armed forces made it quite clear that in their judgment it will have an adverse effect on morale, it will affect operational effectiveness.

"We believe in our judgment the government should get together with its European partners and consider whether or not the convention could be modified to allow individual countries to have an opt-out."

The legal action has been backed by civil rights group Liberty and gay rights group Stonewall, which says a survey shows that public opinion supports a change.

Stonewall's executive director Angela Mason said discrimination was not helping the armed forces, who are desperately short of recruits.

'Uniquely prejudiced'

She said: "Lifting the ban will not make our forces one bit less effective.

"There are those, including the MoD, who claim that men and women in the British armed forces are somehow uniquely prejudiced - that they will refuse to serve with lesbians and gay men. I believe that this is an insult."

According to the NOP poll commissioned by the group last week, seven out of 10 Britons believe lesbians and gay men should be allowed to serve in the armed forces.

Meanwhile, a Royal Navy chef who is almost certainly the last man to be sacked from Britain's armed services for being gay said last week that he was considering suing the MoD.

Richard Young, 25, a reservist at HMS Drake, the Devonport naval base in Plymouth, is angry over losing his job and home after revealing to senior officers that he was gay.