The archbishop of Canberra and Goulburn has told Yass parents trying to save their secondary college they will not be allowed to use the school's name, uniforms and buildings, unless it is Catholic and run by the Catholic Education Office.
But the steering committee said the archbishop had misunderstood their proposal, saying they never meant the new college to be independent from the archdiocese.
In March, the Catholic Education Office announced Yass' Mount Carmel Catholic High School would close at the end of 2014. It was the town's only Catholic secondary college and the move to close was made without consulting parents.
Since then, members of the community have formed a steering committee to help resurrect the school as a new, independent, community-run secondary college in Yass, servicing years 7-12.
But in a letter on Tuesday turning down the steering committee's proposed school model, Archbishop Christopher Prowse said if the new college was to be "independent" of the Catholic Education Office then "such a school is not possible".
"I cannot endorse this new model as proposed at present. This includes use of the name 'Mount Carmel College' as it implies that it is a Catholic school," the archbishop wrote in a letter on Wednesday.
"Also, use of school property and uniforms would not be appropriate as it would send out a confusing message."
But Mount Carmel College steering committee chair and parent Kirsty Dwyer said the archbishop had misunderstood the meaning of "independent", saying the school would only be independently funded and run rather than independent from the archdiocese.
Ms Dwyer said she found the archbishop's letter insulting and the committee felt "incredibly disappointed, let down and abandoned".
"It's a letter that rejects our Catholicism and our commitment to our faith. [We're not allowed] to continue in the teaching of our faith through Catholic education ... unless it's through the Catholic Education Office, who have clearly failed to do so because they've decided to close the school," she said.
In a letter responding to the archbishop, Ms Dwyer said she was disappointed the news had not been delivered in person and accused him of "abandoning your faithful".
"We have been able to develop a [business] plan in nine weeks, one that your offices have been unable to do in years. If they could, we would not be in this position," she said in the letter.
Ms Dwyer said the new Mount Carmel school would still go ahead despite the archbishop's refusal, as the business entity of Mount Carmel had already been registered.
She said the committee would now be seeking nominations for the board of the Mount Carmel College and pursue options for constructing the new school in Yass.
The old heritage-listed school buildings would be left abandoned after the school closed at the end of the year.
"The question needs to be asked of who's going to pay to maintain those if there's no revenue stream via a school to do it," she said.
Ms Dwyer said the committee had received a high level of support from all levels of government, local, state and federal, and she said she'd be in touch with them going into the future.
"Closing schools is how you slowly erode a country town. That's how I feel about it," she said. "It's terribly sad to force your young people to make a choice to be educated in a school that supports your faith and do it in a big city, rather than in your local area.
"I'm sure any parent when asked to put your child on a bus and travel them 52 kilometres to go to a school, when they have a perfectly good option around the corner, would not be satisfied with this response."