Christian bakers who broke discrimination rules by refusing to make a cake with a pro-gay marriage slogan have lost their appeal.
Belfast-based Ashers told gay activist Gareth Lee they would not make the cake featuring Sesame Street puppets and the logo of campaign group Queerspace.
The McArthur family, who own the business, first accepted the order but later declined it because it conflicted with their beliefs that marriage should be between a man and a woman.
In a case taken by the Equality Commission, District Judge Isobel Brownlie ruled that the bakery had broken sexual orientation and political discrimination law and ordered it to pay £500.
But Ashers said it could not, in conscience, produce a cake that they felt would be sinful and have sought to overturn the judgment.
Three senior judges heard the appeal in Belfast in May and the reserved judgement was delivered on Monday.
Ashers, a name with Biblical connotations, has six branches, employs more than 80 people and delivers across the UK and Ireland.
Mr Lee wanted a cake featuring Sesame Street puppets Bert and Ernie with the phrase "Support Gay Marriage" for a private function marking International Day Against Homophobia.
He paid the £36.50 cost in full at Ashers' Belfast city centre branch but two days later was told the company could not provide his order.
Through the legal proceedings, Daniel McArthur, the company's general manager, insisted Mr Lee's sexuality was never an issue - it was the message he wanted the bakery to create that was the problem.
Mr Lee claimed the episode left him feeling like a lesser person.
In the original case, the judge ruled that religious beliefs could not dictate the law and ordered the firm to pay damages.
In delivering the appeal judgment, Northern Ireland's Lord Chief Justice Sir Declan Morgan said Ashers had directly discriminated.
He rejected the argument that the bakery would be endorsing the slogan by baking the cake.
"The fact that a baker provides a cake for a particular team or portrays witches on a Halloween cake does not indicate any support for either," he said.
Sir Declan said the original judgment had been correct in finding that "as a matter of law" Ashers had "discriminated against the respondent directly on the grounds of sexual orientation contrary to the Equality Act (Sexual Orientation) Regulations 2006".
Mr Lee was embraced and shook hands with supporters after the judges left the court.
As he left the court, Mr Lee said: "The only thing that I would like to say is I'm relieved and very grateful to the Court of Appeal for the judgement."
Outside court, Daniel McArthur said he was "extremely disappointed" by the ruling.
Standing with his father Colin, mother Karen and wife Amy, he said the family would be taking legal advice on whether there was a way to appeal against the judgment.
"If equality law means people can be punished for politely refusing to support other people's causes then equality law needs to change," he said.
"This ruling undermines democratic freedom, it undermines religious freedom and it undermines free speech."
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