WASHINGTON, Oct. 10 (AP)--The Supreme Court set the stage for an important church-state decision Tuesday by agreeing to hear the appeal of a Christian youth group banned from using a New York public school after class hours.

The justices said they will decide whether the ban violates the group's free-speech rights and wrongly lets school officials decide what comprises "religious instruction."

The small upstate New York community of Milford has a single school building that houses all grades, kindergarten through 12th grade.

The Milford Central School has had a policy since 1992 allowing community use of the school for "social, civic and recreational meetings and entertainment events and other uses pertaining to the welfare of the community" when classes are not held.

Under the policy, such groups as the Boy Scouts, Girl Scouts, and 4-H Club have used the school building for meetings.

In 1996, a community-based Christian youth group, the Good News Club, sought permission to hold its meetings at the school. School officials refused, stating that the club's meetings would be "the equivalent of religious worship...rather than the expression of religious views or values on a secular subject."

The Good News Club sued the Milford Central School in 1997, contending it was discriminating based on speech viewpoint--a violation of the Constitution's First Amendment.

The lawsuit also said school officials became entangled in religion when trying to determine the difference between banned religious instruction and worship and the allowable "discussion of morals from a religious viewpoint."

A federal trial judge and the 2nd U.S. Circuit Court of Appeals upheld the school's policy and threw out the Good News Club's lawsuit.

But the 8th U.S. Circuit Court of Appeals ruled in favor of another Good News Club in an earlier case from Ladue, Mo. That ruling said school officials violated the club's free-speech rights by refusing to let it use school facilities, while allowing such groups as the Boy Scouts in.

In the appeal acted on Tuesday, lawyers for the Good News Club in Milford said the Central School had created "a market place for community groups to promote the moral and spiritual development of children" but then prohibited the club from entering the market.

The appeal was supported in a friend-of-the-court brief submitted by nine states--Alabama, Iowa, Louisiana, Mississippi, Nebraska, Ohio, South Carolina, Texas, and Virginia.

Lawyers for the Milford Central School urged the justices to reject the appeal. They said the Good News Club's intended use of the school would force officials "to endorse Christianity over all other religions and over no religion at all."

The case is The Good News Club v. Milford Central School.