Lawyers for some of the men and women, including four majors, a squadron leader and two chaplains, believe they will be able to win substantial compensation in the European courts.
Stonewall, the gay and lesbian pressure group, said the forces actively looked for evidence against personnel after tip-offs and gossip. Larger numbers were now leaving because they no longer denied their sexuality when challenged, as they had in the past.
The disclosure of dismissals came in a letter to the Labour MP Barbara Roche from the defence minister Lord Henley.
Mrs Roche, a barrister, commenting on the possibility of a European Court ruling requiring pay-outs to those dismissed, said: 'It may well be that we are talking of large compensation payments.'
She had written to Lord Henley asking how much the MoD had spent training personnel it had then discharged. She said: 'Our armed forces are highly trained - and rightly so. Each person in the armed forces is trained to the cost of the taxpayer and I think the cost is very significant.'
A legal challenge to the European Court of Justice is possible under a 1976 Equal Treatment directive which states there should be no discrimination on grounds of sex either directly or indirectly by reference to marital or family status.
A leading civil rights lawyer, Geoffrey Bindman, insisted in a report in the Guardian newspaper yesterday that there were also clear grounds for a separate case under the European Convention of Human Rights to go to the European Court in Strasbourg.
'Under article eight, which guarantees the right to privacy, two cases involving criminalisation of homosexual behaviour have already been ruled unlawful.'
An MoD spokesman said: 'We do not think we would be required to pay compensation. That is the law as we are advised by our lawyers.' The MoD said that, while British employment law provided protection for various groups of people including disabled people and pregnant women, it was 'not illegal to dismiss a gay person from the services'.
Although gay and lesbian service personnel were dismissed - the MoD's view is that homosexuality is 'not compatible' with service existence - there was no question of those discharged leaving 'under a cloud'. A spokesman said: 'We dismiss 'without prejudice'. We have a chat with the employee, invite that person to take their services elsewhere.'
Of the 260 sacked, 154 were from the Army, 49 from the Navy, and 57 from the RAF. The figures were not broken down by gender, but it is understood that women, who make up only a small proportion of the armed forces, and make up a disproportionate share of those dismissed.
Industrial tribunals have awarded huge levels of compensation including six-figure sums to women dismissed from the services after becoming pregnant.Reuse content