The children, who have not been publicly identified, are in preschool and kindergarten at Sacred Heart of Jesus School in Boulder, Colo.
Archbishop Charles Chaput said his decision does not mean homosexuals are bad or that their children are less loved by God.
"Quite the opposite," Chaput wrote in an article to be published Thursday in Denver's Catholic Register. "But what the Church does teach is that sexual intimacy by anyone outside marriage is wrong."
Chaput said those with a different understanding "have other, excellent options for education and should see in them the better course for their children."
DignityUSA, an activist group for gay Roman Catholics, accused church officials of singling out the children for exclusion, CNN reported Wednesday.
"Until every student's parents are tested on Catholic teaching, this action ... cannot be understood as anything other than discrimination on the back of a child," DignityUSA Executive Director Marianne Duddy-Burke said.