At the centre of the dispute is an Orthodox school in the Emanuel Jewish settlement in the northern West Bank.
Parents from the strictly observant Slonim Hassidic sect of Ashkenazi Jewry refused to let their children attend school with girls of Mideast and North African descent, known as Sephardim.
They insist they are not racist, but want to keep the classrooms segregated, as they have been for years, arguing that the families of the Sephardi girls are not religious enough.
However, the court rejected that argument and ordered the jailing of at least 43 sets of Ashkenazi parents refusing to send their daughters back to school.
'Most dramatic clash'
The dispute was described by the Israeli daily Haaretz as "the most dramatic state-religion clash to break out here".
Sephardi religious leaders have not publicly criticised the demonstration or the parents' conduct, suggesting a reluctance to drive a wedge within the religious community.
Nissim Zeev, a legislator from the conservative Sephardic political party Shas, said: "This is an example of something that should have been passed to a rabbinical court.
"It's out of proportion, and a bit puzzling, that the high court should impose a prison sentence on these parents."
Still, Zeev said the Sephardi girls had the right to choose to attend a mixed school. "If the children are together under one roof, then they are entitled to the same education," he said.
Israel's ultra-Orthodox minority of some 650,000 Jews, just under 10 per cent of the nation's population, is an insular community that has been known to riot over the state's intrusion into its affairs.