In a decision that may clear the way for a controversial Islamic community center and mosque to be built two blocks from Ground Zero, the New York City Landmarks Preservation Commission Tuesday refused to grant landmark status to a 19th century building developers want to turn into the $100 million complex.

The commission's 9-0 decision in lower Manhattan provoked outbursts from some of the 50 people in attendance, with some applauding, while others shouted, "Shame on you!"

"The mosque will glorify the murderers," blared a sign held by Manhattan resident Marion Dreyfus. "This is a sacred site," she said. "And a mosque will remember the people who murdered us. This is a stab in the eye of American democracy."

But Dalia Mahmoud, 31 also of Manhattan, said, "I am very happy about this decision. I think this whole issue has been blown out of proportion based on a lot of ignorance and racism and fear-mongering."

Even as the debate raged, a conservative Washington, D.C., legal group linked to some 9/11 families prepared to file a lawsuit Wednesday to try to block any attempts to demolish the former Burlington Coat Factory building at Park Place and Broadway.

Commission members said the building, constructed in the 1850s in Italian Renaissance palazzo style, is not special or distinctive enough to merit landmark status. They also rejected arguments that the building should qualify because it was hit by debris from one of the hijacked airplanes on 9/11.

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Commissioner Christopher Moore said "there was much debris on that day" that struck buildings and the commission cannot grant landmark status to hundreds of buildings based on that criteria. "We do not landmark the sky."

The decision cleared a major hurdle for the project's developers, since it was the last vote by a public body required before construction could begin. It now opens the way for the developers to apply for building and other permits to proceed with the project.

New York City Mayor Michael Bloomberg later said the vote will help strengthen America's commitment to freedom of religion, while opponents called it an insult to relatives of victims of the Sept. 11, 2001, attacks.

Real-estate developer Sharif El-Gamal, one of the main forces behind the project, now called Park51, declined to say when work on the project would begin or how long it would take to complete.

Washington, D.C.-based American Center for Law and Justice said it plans to file a lawsuit Wednesday charging that the commission failed to follow proper procedure in making its decision. "It has been clear from the beginning that the city has engaged in a rush to push this project through," it said.

But Bloomberg said it wasn't government's place to tell people where or how to worship, and that the country was founded on religious freedom. "The government has no right whatsoever to deny that right - and if it were tried, the courts would almost certainly strike it down as a violation of the U.S. Constitution," he told reporters.

Still, Massapequa resident Rosemary Cain, whose firefighter son George Cain, 35, died in the attacks, said she thinks the mosque should be built at a different location. "I am heartbroken. We are not bigots . . . " she said. "I know that not all Muslims are terrorists, but all these terrorists were Muslims and I cannot forget that."

With Maria Alvarez and Anthony M. DeStefano