Victoria's Upper House has passed legislation to legalise adoption by same-sex couples, but with an exemption for faith-based adoption services.

The bill now needs to go back to the Lower House for approval.

Victorian Minister for Equality Martin Foley said the Government was yet to decide if it would accept the amended legislation.

"In the delivery of state services, the Liberal Party voted to continue allowing discrimination against same-sex families and their children," he said.

"Relinquishing parents in adoption have and will continue to have every right under the adoption act to make sure that their children go to families and circumstances that they wish.

"We don't see why we should take a position that allows any level of discrimination, having said that, a giant step for equality was taken, there was still sadly, work to be done."

The Government previously rejected including religious exemptions, after the Australian Christian Lobby (ACL) pushed for faith-based exemptions earlier this year.

In its submission on the bill, the ACL said there should be "robust protections for adoption agencies to act in good faith meeting the best interests of the children".

In debating the bill Liberal MP Bernie Finn said he did not want to go back to the days of "poofter bashing" but said that his first priority was the rights of children.

"I am not convinced that same-sex adoption is in the best interests of children ... that is not to say that many same-sex couples are not superb parents," he said.

He said couples had raised concerns with him that same-sex couples would "move above them on the [adoption] list as a sign that the Government was serious about this matter".

"That is something I do not think we can rule out," he said.

"We have to take into consideration the views of people who have been on the list for some time and are very keen to adopt."

Religious exemptions should remain: Coalition

The bill passed the Upper House 31 to 8, with members of the Opposition given a free vote on the bill, apart from the religious exemption amendment, which they were compelled to oppose.

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The Opposition's spokesman for equality, David Davis, said the ball was now in Daniel Andrews court to pass the legislation as quickly as possible.

"This is an important step to see same-sex adoption through the Upper House, and now the Government will need to respond quickly, and could pass the legislation on the next sitting Tuesday, within 24 hours," he said.

He said the religious exemption was not discriminatory, and he believed that same-sex couples would be happy with the outcome.

"There are at least five agencies providing services in Victoria, only one of them has indicated they won't provide services to same-sex couples and there's no reason in that circumstance to compel them," he said.

"It means that same-sex couples will be able to get services that they need ... this is obviously a balance to be struck, and the balance has been carefully thought through by the Legislative Council."

Dan Flynn from the ACL said the inclusion of the exemption was a "great win for diversity".

"What was important was that the Catholic Church and the Catholic adoption agency could continue to prefer to give children to a mother and father over a gay couple because of their religious view that the children are best with both a mother and a father," he said.

"I think that it's been a significant stand by the Coalition for freedom of faith generally and I think an acknowledgement that we can have multiple expressions and we don't have to adopt a uniform world view on these things."

He said without the exemption an adoption agency would not have been able to act on a relinquishing mother's request for the child to have a mother and father, without fear of being sued for discrimination.

But Sean Mulcahy from the Victorian Gay and Lesbian Rights Lobby said while he was thrilled to see support for same-sex adoption, discrimination was still there.

"It's a great shame certain faith-based organisations will be able to turn away lesbian, gay, trans and intersex couples based purely [on] who they are," he said.