The teacher, known as Mrs Rainbow, claimed that people her age were likely to have more experience and would be at a disadvantage to other applicants.
The council was unable to justify its claim that it appointed a less experienced candidate because it would cost less.
Alison Wallace, head of the London employment practice at Steptoe & Johnson, said: "This was not direct discrimination which may seem surprising to some but the council's decision to appoint someone with five years' experience or less was based on cost which can be used to justify discrimination.
"However there was found to be indirect discrimination and as the Council did not offer evidence that a financial strategy had been considered for this appointment this was fatal for them."
The amount of Rainbow's compensation is yet to be decided.
Council indirectly discriminates against teacher
Milton Keynes Council has been found to have committed indirect discrimination after it did not employ a 61-year-old teacher with 34 years' experience for a job it advertised requiring "less than five years' experience".
