Sections 78 and 78A relate to the provision for schools to set aside one hour a week for religious instruction, with Section 79 allowing for students to opt out.
"There is a possibility that the provisions will be subject to challenge under the HRA," the report states.
And while it lays out a possible defence for a challenge of indirect discrimination, it acknowledges that an accusation of direct discrimination could not be defended.
"An allegation of indirect discrimination could be defended by evidence that there is good reason for the discrimination, but there is also the possibility that the provisions could be challenged on the grounds of direct discrimination, for which there is no such defence."
The report also acknowledges that religion in schools is a topic that will need to be examined down the track.
"While it is proposed that these provisions remain in their current form in the 1964 act, future policy on the repeal of the 1964 act and the incorporation of its provisions in the Education Act 1989 will need to include consideration of the religious instruction issues to determine to what degree, if any, there should be religious education/instruction in state schools."
Anti-Bible in Schools campaigner Tanya Jacob, from the Secular Education Network (SEN), said it had been a two-year battle to get the ministry to release an unredacted copy of the report, with an appeal to the Ombudsman finding in her favour.
The unredacted report shows religious instruction laws are not regarded as consistent with the HRA, she said.
It shows that "for 15 years the ministry and Ministers of Education have known that it is discriminatory to allow religious instruction, but have done nothing about it", Ms Jacob said.
"They've turned parents asking for help back to the very school boards that have been biased against them and their children in the first place. Children have had to endure religious bullying, some even changing schools to escape it. None of this needed to happen."
Ms Jacob and her SEN co-founder David Hines are among those taking High Court action, challenging whether religious instruction in state schools in consistent with human rights legislation.
"The ministry knew they could be challenged, and likely lose, in court," she said.
"The report adds to a huge amount of evidence, witnesses and support, but we still have to fight for something that should have been taken care of by the ministry 15 years ago."
Ms Jacob and Mr Hines had joined Auckland father Jeff McClintock's High Court case against the Attorney-General and Red Beach School, which his daughter previously attended. He alleged the Bible in Schools classes showed disrespect for his daughter's rights to freedom of religion.
The case was thrown out last month because submissions were not filed in time, but an appeal has been lodged.
Ms Jacob and Mr Hines may also start a fresh proceeding seeking the repeal of legislation allowing for religious instruction, she said.
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