Elderly members wept when they were told that the Rev Ted Pratt had banned the group from St Simon's Church at Southsea, Hampshire, and that it would have to disband.
He acted after an article appeared in the organisation's magazine, Home and Family, which was written by the mother of a gay man and published in December 1995.
The Church of England vicar believed it condoned homosexuality.
He asked the Mothers' Union branch to complain about it to the organisation's leadership. When they refused, he contacted the leadership directly.
Mr Pratt said: "I asked for a similar article written from a traditional Christian stand-point to be printed in their magazine.
"But that request was refused by the worldwide president of the Mothers' Union. I then asked that the matter be discussed by the Mothers' Union Council, but that was also refused.
"It was only after that I decided that I would have to close the branch."
The group, which has some 20 members and was founded 40 years ago, was wound up at an emotional annual meeting when members - many in their seventies - broke down and cried.
The Rev Andy Davis, spokesman for the Bishop of Portsmouth, the Rt Rev Kenneth Stevenson, said: "The bishop has his own views about the issues involved, but won't comment because he sees it as a matter for the incumbent."
The article was written by a former member of the Mothers' Union, Thelma Gabriel, who is from London and who runs a helpline for parents who discover that they have gay children.
Lynette Paul, a general trustee of the Mothers' Union, said: "The editor of Home and Family explained to him that the articles that appear in the magazine do not necessarily reflect the policy of the Mothers' Union.
"The incumbent of every parish is a law to himself. He can close a group within his parish if he wishes and that is what he has done in this case."
The Portsmouth vicar is no stranger to controversy.
In 1995, he spoke out against moves within the Church of England to welcome couples who were living in sin into the Church.
He has also attacked television soap operas as lowering moral standards and contributing to the break-up of family life.Reuse content