John and Colette Yallop told the local council that, if approved as foster parents, they would prefer to meet same-sex couples at a children's centre rather than in their family home.
The couple, from Blackburn, Lancashire, who have been married for nine years, said it would confuse their five-year-old daughter and seven-year-old son.
Lancashire County Council later wrote to Mr and Mrs Yallop to say their application to foster was being terminated because of their views.
Mr Yallop, 62, told a Sunday newspaper: "We are not homophobic and have worked alongside gay people, but we believe inviting gay couples into our home for the handover process might be detrimental to our family life and our young children.
"Even if we disagree with the rights of gay couples to adopt because it goes against our Christian beliefs, it doesn't make us bad foster parents."
The former vicar, who manages a community centre, said he believes children thrive where there is "a mummy and a daddy" rather than two parents of the same sex.
Andrea Minichiello Williams, director of the Christian Legal Centre, said he is supporting the couple in their bid to overturn the ban.
He said: "It is vital that as Christians we are allowed to live out our faith in public and not be eliminated from this kind of vital community work due to oppressive equalities legislation.
"Christian beliefs on marriage and the family produce wonderful, vibrant communities and we need to have the confidence to speak about this and live out our faith."
A Lancashire County Council spokesman said people who wish to foster must be open to working alongside "all approved adopters", including gay and lesbian couples.