The House of Lords on Wednesday night voted to remove a law that criminalises the use of insulting language in Britain.

The upper chamber voted to erase the word "insulting" from the clause in the Public Order Act that covers speech and writing on signs which states "a person is guilty of an offence if he uses threatening, abusive or insulting words or behaviour."

It follows a series of headline-grabbing arrests and prosecutions ranging from an Oxford student asking a police officer "Do you realise your horse is gay?" which Thames Valley police described as homophobic and "offensive to people passing by", to a 16-year old holding up a placard that said "Scientology is a dangerous cult".

Kyle Little, a 16-year-old from Newcastle, was fined £50 with £150 costs for saying "woof" to a labrador dog in front of police officers.

The conviction was quashed.

MPs are likely to be asked to finally decide whether to vote down the Lords amendment early next year. A ComRes survey of MPs in May found 62% believed insults should not be illegal.

"We are absolutely delighted the House of Lords has voted to defend and enhance free speech for everybody," said Simon Calvert, director of the campaign to change the part of the law known as section five.

A prominent supporter of the clause is Stonewall, the gay rights group.

"Section five is a useful and important tool to respond to and prevent deeply offensive homophobic language frequently targeted at one in eight gay people a year" said Sam Dick, head of policy. "We believe clearer guidance for police officers on using section five is needed."

In Wednesday night's debate, peers said the government had concluded there was insufficient evidence that the removal of the world "insulting" would have overall benefits and urged their colleagues to vote against the amendment. It had been sponsored by the former West Midlands chief constable, Lord Dear, Labour peer Baroness Kennedy, the former director of public prosecutions Lord Macdonald and the former Lord Chancellor, Lord Mackay.

The campaign against the law has brought together Christian and secular groups, Tory MPs and human rights campaigners, the comedian Rowan Atkinson and the gay rights and free speech campaigner Peter Tatchell. Former shadow home secretary David Davis established the "Feel Free to Insult Me" campaign which highlighted examples of the law's application including the treatment of John Richards, an atheist pensioner from Lincolnshire, who emailed police asking what would happen if he put up an A4 sign in his window saying "religions are fairy stories for adults". Lincolnshire police told him he could be arrested for "causing alarm and distress".

Keir Starmer, the current director of public prosecutions has backed a change in the law, writing to the amendment sponsors last week: "We are unable to identify a case in which the alleged behaviour leading to conviction could not properly be characterised as 'abusive' as well as 'insulting'. I therefore agree that the word 'insulting' could safely be removed without the risk of undermining the ability of the CPS to bring prosecutions."

"The criminalisation of insults is far too subjective and constitutes a dangerously low prosecution threshold," said Tatchell. "Anyone who values free speech and robust debate should welcome its removal from section five. The section five ban on insults has been abused to variously arrest people protesting peacefully against abortion and campaigning for gay equality and animal welfare. The open exchange of ideas – including unpalatable, even offensive ones – is the hallmark of a free and democratic society".