Lawyers for Fatima Afif, who was fired by the Baby-Loup crêche in 2008, took the case to the UN committee after France's highest court endorsed her dismissal in 2014 at the culmination of a long legal battle.
That ruling overturned a lower court's decision in her favour.
Baby-Loup was a crêche in Chanteloup-les-Vignes, outside Paris, that was open 24 hours a day, seven days a week and aimed to involve local women in its work.
The case led MPs to amend labour law to allow private employers to limit the expression of their employees' personal convictions in certain circumstances.
But the UN body ruled that France was in breach of international agreements on human rights by infringing religious freedom and religious and gender discrimination.
Wearing Islamic head cover is not an "ostentatious" sign of religious conviction equivalent to proselytism, the UN body said, rebutting an argument of French supporters of headscarf bans.
The council ordered the French government to make its judgement public, which has not yet been done, to compensate Afif within 180 days and take the necessary steps to prevent similar actions in the future.