NEW YORK, July 20 (Reuters) - A pro-Israel group must be allowed to place a paid advertisement on New York City public buses that a U.S. judge on Friday said likens Muslims to savages.

U.S. District Judge Paul Engelmayer in Manhattan in a written opinion said a 1997 rule by the Metropolitan Transportation Authority that barred demeaning language in advertisements was a violation of free speech.

While the rule was well intentioned, the judge found, it had the effect of discriminating against certain advertisers based on the content of their proposed message.

The advocacy group American Freedom Defense Initiative sued the MTA in September 2011 after the transit agency denied its proposed ad.

The ad said: "In any war between the civilized man and the savage, support the civilized man. Support Israel/Defeat Jihad." The ad would have been posted on 318 city buses for four weeks, at a cost of about $25,000, the opinion said.

The American Freedom Defense Initiative, based in Sherman Oaks, California, has been one of the most vocal opponents to the planned construction of a mosque and Islamic center near Ground Zero in lower Manhattan. The group says the prayer center is funded by Islamists and would sully the memory of victims of the Sept. 11, 2001, attacks.

"This is a great victory for the First Amendment," the group said on its website. "Disallowing a pro-Israel ad was clearly a politically correct, politically motivated denial of free speech," said Pamela Geller, the group's executive director.

The MTA said in a statement that it was reviewing the opinion and "is evaluating its existing advertising standards in light of the court's ruling."

Citing the 1998 2nd U.S. Circuit Court of Appeals opinion, New York Magazine v. Metropolitan Transportation Authority, the judge said the advertising space on public buses should be considered a public forum.

In addition, the judge said that because the ad in question was core political speech, it was entitled to the "highest level of protection under the First Amendment."

"By differentiating between which people or groups can and cannot be demeaned on the exterior of a city bus, MTA's no-demeaning standard ... discriminates based on content," the opinion said.

The judge said his preliminary injunction would take effect in 30 days, at which time the MTA would be prevented from enforcing the standard.

The standard bars any ads that "contain ... information that demean(s) an individual or group of individuals on account of race, color, religion, national origin, ancestry, gender, age, disability or sexual orientation."

The judge said that MTA officials had been correct to regard the ad as "demeaning a group of people based on religion (Islam)."

"In the Court's view, MTA reasonably read the AFDI Ad to target as "savages" persons who adhere to Islam, i.e., Muslims," the judge said.

Yet, the standard itself does allow for demeaning statements on a host of other topics, such as where they live, their job or their political affiliation, the judge said.

The case is American Freedom Defense Initiative v. Metropolitan Transportation Authority, U.S. District Court for the Southern District of New York, No. 11-cv-6774.

For the AFDI: David Yerushalmi of the American Freedom Law Center.

For the MTA: Peter Sistrom of the MTA.

(Reporting By Basil Katz)

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