The group, Business Leaders in Christ (BLinC) is now taking the University of Iowa (UI) in the US to court, claiming the ban it received amounts to religious discrimination.
In response, the university told Premier: "The University of Iowa recently found Business Leaders in Christ violated the UI's Human Rights Policy and the Iowa Civil Rights Act.
"The University of Iowa does not tolerate discrimination of any kind, in accordance with federal and state law."
A permit allowing BLinC to operate as a recognised students group was withdrawn when a student claimed he was stopped for taking on a leadership role because he is a homosexual.
A BLinC mission statement requires leaders to conduct themselves "without the greed, racism, sexual immorality, and selfishness that all too often arise in business, political, and cultural institutions."
The group was quoted by the Washington Times as saying: "BLinC declined the student's request because he expressly stated that he rejected BLinC's religious beliefs and would not follow them."
Lawyers acting for the BLinC are now calling upon a federal court to agree that the University of Iowa has violated the group's constitutional rights.
Eric Baxter from the Becket Fund for Religious Liberty in Washington DC, which is supporting the group, was quoted by the Washington Times as saying: "This is premeditated religious discrimination, plain and simple."
The University of Iowa (UI) said it "respects the right of students, faculty, and staff to practice the religion of their choice."
The institution added: "However, when a voluntary student organisation chooses to become a registered student organisation, it must adhere to the mission of the university, the UI's policies and procedures, and all local, state, and federal laws."