Ministers have been refused permission to appeal against a court ruling that the murderer of head teacher Philip Lawrence cannot be deported to Italy.
Learco Chindamo could be freed next year
The Home Office wanted to challenge a tribunal decision that Learco Chindamo, jailed in 1996, could not be deported on release, expected next year.
Chindamo, now 26, stabbed Mr Lawrence who was trying to protect another pupil at the gates of his west London school.
Ministers said they would try for a further appeal before the High Court.
Learco Chindamo was born in Italy but, from the age of six, lived in the UK.
He was 15 when he was jailed for Mr Lawrence's 1995 murder. He is eligible for parole from 2008.
Ministers had told Frances Lawrence, the teacher's widow, that they intended to seek Chindamo's deportation to Italy when he became eligible for parole.
However, the Asylum and Immigration Tribunal (AIT) ruled in August that Chindamo should not be deported on release.
'No threat to society'
British residents from other EU countries have some protection against deportation if the UK is considered their normal home.
Frances Lawrence said she felt "utterly devastated"
The tribunal found that, while Chindamo had committed an extremely serious crime as a 15-year-old, he no longer posed a serious threat to society.
The deputy governor of Chindamo's prison had written a letter to the tribunal saying that the 26-year-old was one of only a few offenders he had met whom he believed had demonstrated a change for the better and was capable of a "lawful and purposeful" life on release.
Lawyers for the Home Office had argued that Chindamo should be deported because he "posed a continuing risk to the public".
Court papers showed the killer had been rated as the highest level of risk because of his notoriety and would need to be excluded from certain parts of the country.
The Home Office asked the tribunal to rethink its decision on the basis of an error of law. However, on Friday the Home Office confirmed the tribunal's decision had been upheld.
The Home Office will now make a final appeal at the High Court and ask another judge to send it back to the tribunal for reconsideration.
Nigel Leskin, solicitor for Chindamo, said the ruling had been "the right decision".
Immigration minister Liam Byrne said the government wanted foreign nationals who committed serious crimes to be "automatically deported".
"We are very disappointed by the determination," said Mr Byrne.
"The Home Office believes the AIT provided insufficient detail to justify rejecting deportation in this case and gave insufficient weight to the seriousness of Chindamo's original offence when deciding whether he remains a threat to society.
"I have instructed officials to apply immediately to the High Court to have the original decision reconsidered."