NEW YORK — A federal appeals court panel has upheld a city policy on holiday displays for its schools that allows Santa Claus, reindeer, Christmas trees and symbols of Jewish and Islamic holidays but prohibits Nativity scenes.

The 2-1 ruling in Skoros v. City of New York on Feb. 2 by the 2nd U.S. Circuit Court of Appeals upheld the decision of a lower court judge who found that the city's policy of permitting secular symbols had the desired effect of neither advancing nor inhibiting religion.

The appeals court concluded that no objective observer would believe it was the city's purpose to denigrate Christianity, even if the Department of Education erred in characterizing a Jewish menorah and an Islamic star and crescent as secular symbols.

"No reasonable objective observer would perceive from the totality of the circumstances in this case that the purpose of the challenged display policy was, in fact, to communicate to city schoolchildren any official endorsement of Judaism and Islam or any dismissal of Christianity," the court wrote.

Instead, the court said, the actual and perceived purpose of the holiday display policy was to use holiday celebrations to encourage respect for the city's diverse cultural traditions.

In a dissent, Judge Chester Straub said the policy promotes a year-end holiday celebration which "utilizes religious symbols of certain religions, but bans the religious symbols of another."

The policy affects more than 1 million students enrolled in 1,200 public schools and programs in the nation's largest public school system.

The case was brought in 2002 in Brooklyn federal court by Andrea Skoros, a Roman Catholic mother of two sons who attended public schools. She said in her lawsuit that the policy promoted and endorsed the religions of Judaism and Islam and conveyed a message of disapproval toward Christianity.

The appeals court noted that Skoros was not trying to stop the display of the menorah and star and crescent but rather wanted to force the schools to allow Nativity scenes.

Robert Muise, an Ann Arbor, Mich.-based lawyer who argued the case for Skoros, said he would ask the full 2nd Circuit to hear the case. If that fails, he said, he'll appeal it to the U.S. Supreme Court.

Muise said the new Supreme Court justices were "just waiting for cases like this to come before them to hopefully straighten out the mess the courts have created."

Cheryl Payer, a city lawyer who argued before the appeals court, said the city was pleased with the ruling.