JERUSALEM -- A longstanding guideline on public religious observance has been challenged by a Jerusalem court decision that allows the operation of cinemas here on the Jewish Sabbath.

A magistrate's court said the Jerusalem municipality was not authorized to enact laws regarding the public observance of religious laws. If upheld, the ruling would shatter more than four decades of municipal law that has prohibited the operation of businesses on the Sabbath.

The municipal laws grew out of of a loosely defined set of regulations on Israeli commitment to observance of the religious law called the "status quo," agreed to by the country's first prime minister, David Ben-Gurion, and Orthodox Jewish leaders.

The status quo called for official observance of Jewish law regarding the Sabbath and Jewish holidays, which has meant a halt in public transportation and the closing of state-owned businesses.

The current court decision stemmed from a suit brought by Jerusalem officials against a cinema owner who opened for business on the Sabbath, in violation of a 30-year-old law.

Ayala Proktsya, a special judge for municipal affairs, ruled that only the Knesset can legislate laws that shut down businesses on the Sabbath. Regulations growing out of the status quo agreement "that ban the opening of places of entertainment on the Sabbath cannot stand up to the legal test and should be seen as invalidated," the judge ruled.

The judge dropped all charges against the cinema owner, Amatzia Kaplan, basing her decision on what she termed Israel's principles of freedom of religion and civil rights.

The decision sent shock waves through Orthodox circles in Israel.

"This is a very grave decision," said Itzhak Peretz, leader of the Orthodox Shas Party. "It is like an earthquake that destroys the entire issue of the status quo."

Peretz, who resigned as interior minister rather than follow a court order to register as Jewish an American immigrant converted by a Reform rabbi, said the religious parties will appeal the decision to the High Court of Justice.

Jerusalem Mayor Teddy Kollek said the city is still considering whether to file an appeal. "It's a law that has been on the books for many years in the municipality," he said. "The possibilities are not so simple."

A committee appointed by Kollek called for cultural activities to be permitted on the Sabbath. The recommendation has drawn fire from Orthodox Jews, who say that such permission has allowed movies to operate.

Secular activists reacted to the decision by saying they will press for the operation of all cinemas in Jerusalem.