Jennie Cain has since resigned from her job at the school
A Christian primary school receptionist from Devon who sued her employers for religious discrimination has reached an out-of-court settlement.
Jennie Cain, from Crediton, will receive an "undisclosed payment" from Devon County Council.
Her discrimination claim arose after she was found guilty of serious misconduct over a series of emails relating to her faith.
Mrs Cain said she was "pleased the matter has been resolved".
The row began when Mrs Cain, a part-time receptionist at Landscore Primary School in Crediton, sent what she claimed was a private email to ten close friends from her church asking for prayer support for her daughter, a pupil at the school.
In the email she claimed her daughter had come home in tears one day after being reprimanded by her teacher for talking about "God and heaven" and had been warned not to talk about "Jesus" again.
The school claimed Mrs Cain's daughter had frightened another pupil by telling her she would "go to hell" if she did not believe in God.
Mrs Cain's email was forwarded by a member of the congregation to the school's head teacher and she was suspended for nearly four months while the allegations she had made were investigated.
An internal panel found her guilty of serious misconduct. She lost an appeal and received a written warning.
She had been scheduled to take her religious discrimination claim to an Exeter employment tribunal for a full hearing.
In a joint statement Devon County Council and the Christian Institute, which represented Mrs Cain, said: "The parties have agreed to disagree as to whether Mrs Cain has been discriminated against on the grounds of her religion by either staff at the school or the local authority.
"All parties jointly acknowledge that all faiths, including Christianity, must be treated equally and with sensitivity."
Mrs Cain has now decided to resign from the school.
"We all agree that Christians should be treated with the same sensitivity and respect that is shown to people of all faiths and none," she commented.
The settlement comes just days after Exeter nurse Shirley Caplin lost her religious discrimination claim against the Royal Devon and Exeter Hospitals NHS Trust over her refusal to stop wearing her crucifix chain while working with patients.