Around half the students at one pioneering Wisconsin high school are gay, many of them dropouts from mainstream education. But is this just a new kind of sexual segregation?

In the first graduating class at Milwaukee's Alliance High School, the valedictorian – the year's most distinguished student – scored a D+. "They were smart," recalls Tina Owen, the school's founder and lead teacher. "But a lot of them had not been going to school because they were being bullied, and a lot of them had problems at home. That year we had 15 kids. Five of them had lived with me at some point during the year, for one reason or another."

Alliance is not a regular school. Its aim is to cater to a community that is at best ignored and, at worst, is actively denied its existence – lesbian and gay youth. Call it a gay school and you will be promptly corrected. There's no entrance criteria on the grounds of sexual orientation or anything else. The school building, an unassuming brick block set back from a main road, doesn't fly rainbow flags or emblazon its walls with posters of pink triangles. Owen guesses about half the students are LGBT (Lesbian, Gay, Bisexual or Transgender). "If you are gay, no big deal," she says. "If you aren't, no big deal."

But the school, which is funded by the state of Wisconsin, is self-avowedly gay-friendly. "Here they can talk about a relationship or a break-up without worrying about how that's going to be received," explains Owen. The posts of Prom King and Prom Queen are open for anyone to run for, regardless of their gender. A mural at its entrance bears the words "knowledge, respect, peace", and a sign saying Stonewall Inn. It's a small school – just 165 students – where everybody knows each other. The corridors host more than the regular share of boys with shoulder-length hair or painted nails. All together it adds up to a critical mass of children who say they felt they didn't fit in elsewhere – whether they are goths, punks or nerds – which makes being a non-conformist at Alliance the norm. The school's art teacher affectionately described the school to Time magazine as "the island of misfit toys".

At a time when sexual diversity has never been more accepted in the US, the emergence of such schools – there are a few around the country – seems paradoxical. "What does it say about our country that we have schools like this?" asks Ritch Savin-Williams, a professor of developmental psychology at Cornell university, and author of The New Gay Teenager. They have come under fire from social conservatives, religious groups and some in the gay community.

Owen admits it is not to everyone's liking. One boy called home after his first few days there and said: "Dad, get me out of here, these kids are freaks."

But to others it's literally a lifesaver. Dylan Huegerich's long hair and occasional use of makeup made him the subject of frequent taunts in school in the small town of Saukville where he grew up. "It hurt so bad," he said. "I hated my life. I hated everything. When his mother complained to the school she was told he should cut his hair and try to act "more manly". Every morning, she told Time, "I knew I was driving him back to this place where he was hurting. Oh, they beat you up? Here, go there again. My heart broke every time he got out of the car."

She decided not to enroll him for eighth grade. "I felt like if I turned in those forms, I was giving him some kind of a sentence." So he went to Alliance, a 90-minute commute away.

The school, founded in 2005, was modeled on Manhattan's Harvey Milk High School, which was named after the late San Fransisco gay activist whose story was the basis for the award-winning film Milk, and which became fully accredited in 2002. It started as a high school (ages 14-18), expanded to include middle school-age children (11-14) as well, and is now about to revert to being just a high school again.

Michael Freytes, 17, who is straight, says he likes Alliance because he doesn't feel judged. "When I was in middle school I was being bullied a lot. I tried to fit in but I couldn't. But if there's a problem like that at Alliance the other students don't tolerate it and the teachers take care of it." The students resolve conflict through what they call "restorative justice", though a "justice circle", governed by students, which Freytes says "tries to figure out the problem and then fix it without things getting out of control".

The primary justification for the existence of schools such as Alliance is safety – an institutional response to the pervasive bullying experienced by LGBT youth and others in mainstream schools.

The problem seems severe. A 2009 survey conducted by the Gay, Lesbian and Straight Education Network (GLSEN) revealed that 9 out of 10 LGBT students said they had experienced harassment or bullying. Almost two-thirds claimed they felt unsafe in school, while one in five said they had been physically assaulted. A 2007 survey revealed that 39% reported physical assaults and, of those who told teachers or administrators about the bullying, only 29% said it resulted in effective intervention. The 2009 survey also found that the frequency with which LGBT students experienced more severe forms of bullying and harassment had held steady over the previous decade.

Last winter, 14-year-old Kenneth Weishuhn killed himself after he came out at his Iowa high school. Anonymous threats on his voicemail were followed by yelling and physical harassment that got so bad teachers had to stand guard in the hallways. Kenneth eventually hung himself in his parents' garage.

Even when parents aren't prepared to accept their children are gay, says Owen, they understand the need to put their child in a nurturing environment. "They want their kid to be safe. They want to know that their child is not going to be spat on or kicked just because of who they are."

Attitudes towards homosexuality are changing radically in the US, even in midwestern states such as Wisconsin, and even if every time gay marriage has been put to the vote at a state level, it has failed. President Obama recently came out in favour of gay marriage, which is legal in six states and Washington DC, covering 12% of the country. According to Gallup, today almost two-thirds of people in the US believe lesbian and gay relationships should be legal, compared with fewer than half in 1977.

Today more than half (54%) believe homosexuality is morally acceptable, compared with 40% in 1977. And the people most likely to be comfortable with homosexuality as a fact of life that should enjoy equal rights and protection are the young.

Predictably, social conservatives are not enamoured with this trend or this educational response. The chairman of the Conservative party of New York State, Michael Long, said the establishment of the Harvey Milk School amounted to social engineering. "Is there a different way to teach homosexuals? Is there gay math? This is wrong … there's no reason these children should be treated separately."

Nonetheless, they are often treated differently, and Chad Weiden, who led efforts to set up a gay-friendly school in Chicago, says that part of the skill in teaching is making sometimes abstract issues accessible to students. "It's all about making it relevant to kids. If you're doing probability in math, you could illustrate it by looking at GLBT suicides or stop-and-frisk or unemployment. A good curriculum would also deal with issues of sexual orientation when covering things like evolution, biodiversity, anthropology, history and literature. That should be true of any school, not just one that considers itself gay-friendly."

But behind these conservative attacks lie two broader motivations. The first, underpinned by the notion that homosexuality is wrong, is that any mention of homosexuality "normalises" gay identity, and might encourage impressionable young people to become gay who otherwise wouldn't.

"What about that girl who is a virgin, who is being harassed by lesbians and guys to have sex, and yet you're going to build a gay school?" a Chicago minister, Wilfredo de Jesus, asked the Chicago Journal. "It's not fair."

Such accusations, says Savin-Williams, are absurd. "There is absolutely no evidence that gay or straight kids can be created in that way, let alone converted. It's a nonsense."

Some would rather that gay youth were neither seen nor heard. A network of gay-straight alliance clubs have sprung up in schools around the US, to provide peer-group support for lesbian and gay students. But their emergence has often been challenged by school authorities and conservative parents, forcing students to the courts to defend their right to self-organise, as happened last year in West Bend, Wisconsin, just 45 minutes' drive from Alliance.

The right calls efforts to recognise sexual diversity "pushing a gay agenda". When Weiden was trying to set up his school, conservatives tried to provoke them into saying they would promote gay lifestyles. "They were just goading us. 'Say it, say it, will you teach gay lifestyles.' I could have said: 'I'm gay, the kids are going to be gay, it's going to be the biggest flaming school in the city.' But we were just not going to say that."

The second motivation, however, is steeped in a far more pervasive belief that gay teens and pre-teens are simply not in a position to fully understand and label their sexual orientation: that like being a goth, punk or nerd, it might just be a phase they were going through. This partly resides in the anxiety most parents have about their adolescent children's burgeoning sexuality.

But it is also a function of associating an awareness of being gay with being sexually active, and holding gay identity to a different standard to heterosexuals. A 12-year-old boy expressing a furtive interest in girls or vice versa would provoke little concern. Indeed, the issue of his straightness wouldn't even come up. A 12-year-old boy who finds himself attracted to other boys, however, would not have that luxury. Since sexual identity is fluid there is, of course, the possibility that preferences may change. But that is no less true for the straight boy than the gay one. And, the chances are that, whichever gender they are attracted to, both may well still be waiting for their first kiss.

"No one says to [a straight teen or pre-teen boy]: 'Are you sure? You're too young to know if you like girls. It's probably just a phase,'" Eileen Ross, a director of the Outlet Program, a support service for gay youth in California told the New York Times. "But that's what we say too often to gay youth. We deny them their feelings and truth in a way we would never do with a heterosexual young person."

In previous generations young people would wait until college to come out. Now they feel sufficiently emboldened to come out in middle or high school – at an age and in a place characterised by teasing, bullying, sexual exploration and hormonal turbulence. "Kids are definitely coming out earlier, and middle school is definitely the worst time for bullying, whether you're straight or gay," says Savin-Williams. There are several summer camps around the country, that cater to transgender children as young as eight.

"We always knew middle school was a time when kids struggle with their identity," one middle-school counsellor told the New York Times, confessing that her school was "totally unprepared" for openly gay students, "but it was easy to let anti-gay language slide because it's so imbedded in middle-school culture, and because we didn't have students who were out to us or their classmates. Now we do, so we're playing catch up to try to keep them safe."

But gay-friendly schools have also met resistance from members of the gay community who believe that such schools amount to segregation, simply sheltering gay youth from the realities of homophobia while letting mainstream schools off the hook.

Savin-Williams is skeptical about the purpose of gay-friendly schools. "Most of the kids who are at these schools are there not so much because they are gay, but because they are very gender atypical [not conforming to traditional stereotypes]. That's not most gay kids. Where does it stop? Do you have a school for fat kids and annoying kids and all the others who just don't fit in?"

In Chicago the combined opposition of religious, conservative and gay opposition scuppered plans to build a similar school.

"There was push back from the gay community," says Weiden, who pioneered the effort. "The elders were against it. They thought it was segregation. 'If you create this school,' they said, 'then you don't make other schools accountable.' But kids are scared now. They're hurting now. Making the schools accountable will take years. I hope that in 10 years you wouldn't need our school anymore. But they need it now."

Owen agrees. "As much as it should be being addressed in other schools, the fact is that it isn't," she says. "And it's not as though our students were unaware of what was out there. That's why they're here. They say: 'We do the world everyday. We know what the world is like.' And the reality is that the world outside high school is much more like this. It's much more gay-friendly than high schools are."

Gay youth and British schools

More than half of lesbian, gay and bisexual young people have experienced homophobic bullying at school in the UK, according to a survey published by Stonewall earlier this month. Almost all of the 1,600 young people questioned said homophobic name-calling is common, a finding backed up by a recent Ofsted report that found widespread use of the word "gay" as an insult.

Wes Streeting, Stonewall's head of education, said: "We've found that homophobic bullying is lower in schools that explicitly state homophobic bullying is wrong and where incidents are dealt with swiftly and seriously. The best schools are those that go beyond tackling bullying by celebrating difference and addressing gay issues in a positive way across the curriculum."

At one primary school that successfully countered bullying, Ofsted inspectors said pupils were comfortable about rejecting stereotypes – a six-year-old boy wore a tutu without comment from classmates, while a girl wrote a fairy story that ended with the marriage of two princesses. Children in Year Six learned about gay role models such as the actor Ian McKellen and the rugby player Gareth Thomas (pictured).

At another school where many pupils had anti-gay attitudes – children frequently used terms such as "batty man" and "queer" – the headteacher used the curriculum to explore gay topics; studying Alan Turing's life in technology lessons and the Nazi persecution of homosexuals in history. The school brought in external role models including a black lesbian rapper and a gay Muslim group.

Ofsted found a "significant decrease" in bullying in the school, while staff and pupils who were lesbian or gay were able to be more open about their sexuality without fear of harassment. Jeevan Vasagar