GracePointe Church in Franklin near Nashville said it will break with the "traditional" stance on sexual orientation and offer gay people the same rights as heterosexuals.
Pastor Stan Mitchell announced the decision during a sermon and said: "We have been graciously subjected to other people's stories.
"They have been stories of joy unspeakable and they have been stories of unspeakable pain.
"We have accrued many new brothers and sisters - you are here today because you are simply grateful to find a place like ours, willing to engage in vital conversations in spite of their difficulty.
"I know you're glad you found us and we're glad we found you."
In the sermon the pastor accepted that the church of 1,800 people had lost members over the decision.
He said the church would now give gay people the same rights as others "including child dedication, leadership opportunities and marriage" but said it was "with the same expectations of faithfulness, sobriety, holiness, fidelity and willingness as expected of all."
The discussions and debates over the issue had lasted more than two years and was "at times, devastating," he said.
Gay marriage is still banned in Tennessee.
Recently the Presbytery of Middle Tennessee voted yes on gay marriage.