Principal of the east London's St Stephen's School, Neena Lall had last month decided to impose a the ban on girls under eight on the grounds that Islamic teaching did not require girls to wear it until reaching puberty.
But she was forced to reverse decision after a social media campaign, which included her being likened to German dictator Adolf Hitler.
The school in a statement said that the decision has been reversed, a move that followed the resignation of the chair of governors, Arif Qawi.
Speaking in favour of Lall, chief of the Office for Standards in Education, Children's Services and Skills (Ofsted), Amanda Spielman warned that religious extremists were "perverting" education.
Ofsted is a non-ministerial department of the UK government, reporting to Parliament.
"I want to be absolutely clear, Ofsted will always back heads who take tough decisions in the interests of their pupils," Spielman said in a speech to a Church of England schools conference.
"School leaders must have the right to set school uniform policies in a way that they see fit, in order to promote cohesion," she added.
Spielman said it is a matter of "deep regret" that the school, considered one of the best in the UK, has been subjected to "a campaign of abuse by some elements within the community".
"Rather than adopting a passive liberalism, that says 'anything goes' for fear of causing offence, school leaders should be promoting a muscular liberalism...schools must not be afraid to call out practices, whatever their justification, that limit young people's experiences and learning," she noted.
The Ofsted chief, who has cracked down on unregistered faith schools in the UK, warned that under the pretext of religious belief, some extremists were using education institutions, legal and illegal, to narrow young people's horizons, to isolate and segregate, and in the worst cases to "indoctrinate impressionable minds with extremist ideology".
Spielman's message to schools in Britain is that they have a responsibility to "tackle those who actively undermine fundamental British values or equalities law".
School leaders may need to make "uncomfortable decisions" in the interests of their pupils, and not assume that the most conservative sections of a particular faith represent all its members.
The school, with a majority of pupils from Indian, Pakistani or Bangladeshi backgrounds, has earlier urged the UK government to issue clear guidelines on the issue of hijab- wearing and religious fasting relating to very young pupils to prevent a backlash from parents.
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