A federal judge is blocking the display of about 30 crosses on public land along the Ohio River in Evansville, Ind.
Children from West Side Christian Church's Bible school created the display.
An American Civil Liberties Union lawsuit claims allowing a church to display the crosses would violate the First Amendment.
The judge ruled in their favor, saying the size and duration of the display would convey an endorsement of religion by the city.
"This ruling should not be understood to foreclose or prohibit any and all unattended displays on the Riverfront area that convey a religious message," U.S. District Judge Sarah Evans Barker wrote.
"To stay within constitutional bounds, however, it must stop short of creating a message that overwhelms the nature of the public forum, thereby transforming it into government-endorsed religious speech," she said.
But Keith Vonderahe, the city's attorney, said it has never turned down a request to use the area for free-speech purposes.
"The decision doesn't say what's acceptable. It says what is not," he said.
Chris Wischer, an attorney for the church, said, "The ultimate question is at what point do we cross the line?" Wischer said.
"The silver lining is she recognizes there are displays that are appropriate. She's left open the possibility of a display," he added.