Vicky Allen ran into trouble at Brannel School in Cornwall when she told a 14-year-old autistic student she was unhappy with the way the Biblical rainbow symbol is used to represent gay pride.
She also told the student she did not approve of same-sex relationships, when he asked her views on the subject.
On Monday, the 51-year-old took her case to the Bristol Employment Tribunal in an attempt to overturn the disciplinary action, which left a formal written warning on her record for the period of a year.
In a statement given to Premier, Ms Allen and the school agreed to settle their case and continue to work with each other to secure a continuing healthy working environment in the school.
It says: "The parties accept that some people have deeply held views about the nature of marriage, and that every individual has the freedom to express these in accordance with the law. The School also respects that Victoria Allen's view that marriage should be between a man and a woman is sincerely held and shared by many others.
"Andy Edmonds, the Head teacher, has recognised Victoria Allen's right to share her Christian beliefs with students and has apologised for any upset that Victoria Allen may have felt during the disciplinary process.
"Victoria Allen has accepted that it is reasonable for the school to request that staff share balanced views with students when asked questions of their personal beliefs and opinion under the requirements of equalities legislation including the Equality Act 2010 and the Education Act 1996."