The London School of Economics was found guilty by an employment tribunal this week of sexual discrimination against a female lecturer.
The tribunal found unanimously that Helen Mercer, a lecturer in business history, had suffered discrimination both directly when denied a permanent post and indirectly because of the research assessment exercise.
The LSE is seeking legal advice on whether or not to appeal.
Dr Mercer, 43, who no longer works in academia, said she brought the case because she was angry at how her career had been "completely thrown off course".
"If the LSE, where I was an insider, would not take me because of the RAE, what university would?" she said. "Women have historically had a lot of problems with discrimination in universities and the RAE can be another block in their path."
Dr Mercer brought the case in 1998, after being rejected for a job at the LSE, where she had been working for two years on a fixed-term contract. Her research and teaching were highly praised by the LSE and her previous employer, the University of Leeds.
The successful applicant, Tim Leunig, then , had less teaching experience and had not been involved in the 1996 RAE but had been recommended as "a rising star" who would be good at making contacts in the United States.
When Dr Mercer asked why she had lost out to Dr Leunig she was told the selection committee judged his research potential and ability to contribute to a 5* rating in the next RAE was better.
But the tribunal found the selection panel had "moved the goal-posts" by taking into account potential for the next RAE, which was not in the job description.
It drew an inference that Nicholas Crafts, the professor of economic history who cut the number of women on the shortlist, did not want to appoint a woman.
It found that making RAE participation a condition of employment was discriminatory because of the lower number of women taking part in the RAE than men.
Sally Hunt, assistant general secretary of the Association of University Teachers, said: "I hope it will be the start of a process by which employers in higher education take gender disparity in appointment procedures seriously."
Compensation will be announced at the end of May.
Features, page 22