The Berlin-Brandenburg court on Thursday ruled on the side of the woman, who was denied a teaching job at a Berlin elementary school.
Head judge Renate Schaude said that the woman had been discriminated against and because her wearing a headscarf posed no danger to school peace, the discrimination against her was illegal. She was therefore awarded €8,680 in compensation.
She had lost her initial case last year as the Berlin school argued neutrality rules meant no one could wear religious symbols in schools.
But in 2015, Germany's Constitutional Court ruled that general bans on state school teachers wearing headscarves were unconstitutional - unless headscarves were found to “constitute a sufficiently specific danger of impairing the peace at school or the state's duty of neutrality.”
After this major ruling, some states had to revise their regulations - also because they gave preferential treatment to Christian symbols.
But the Berlin-Brandenburg court ruled that Berlin's neutrality rules were still constitutional. This law states that police, teachers, and justice workers may not wear any religious apparel.
A court in Osnabrück last month ruled very differently than the Berlin-Brandenburg court. In that case, a Muslim woman in Lower Saxony was also not allowed to teach due to her headscarf in 2013. But despite the 2015 Constitutional Court ruling, the lower Osnabrück court said that the school had made a valid decision based on the legal basis at the time.