State Parliament's upper house on Thursday night passed a bill allowing same-sex couples to adopt, but with a late change allowing faith-based agencies to continue to reject gay couples.

Labor controls only 14 out of 40 upper house seats, meaning it needs an extra seven votes for a majority. After hours of debate, all Liberal and National Party MPs, Democratic Labour Party MP Rachel Carling-Jenkins, Vote 1 Local Jobs MP James Purcell and the two Shooters and Fishers MPs voted in favour of the exemption.

The move means the bill will now be sent back to the lower house where the onus will be on Labor to accept the amendment or to refuse to pass the bill outright, potentially denying the rights of same-sex couples to adopt.

Premier Daniel Andrews has previously insisted he wants all forms of discrimination ended, arguing there should be no exemptions.

Labor's Minister for Equality, Martin Foley, said the government was still considering whether to pass the historic change with the amendment, while slamming the opposition for allowing discrimination to continue.

"Matthew Guy has let down all Victorians who support equality, including thousands of rainbow families across our state," Mr Foley said.

"Matthew Guy has confirmed that he is the leader of the same old, tired, and out-of-touch Liberal Party that was rejected by Victorians 12 months ago."

Opposition equality spokesman David Davis said the onus was now on Labor, insisting same-sex couples would still be able to adopt under the changes. He said he believed it was inconceivable Labor would refuse to pass the bill.

Mr Guy is keen to present his party as a socially progressive and has previously backed the concept of same-sex marriage and gay adoption.

He also recently told The Sunday Age he wants a more compassionate approach to asylum seekers, more women in Parliament and more people from non-English speaking backgrounds.

But he must also manage more conservative elements of his own party. Although Mr Guy allowed a conscience vote on the bill, Liberal MPs were forced to vote as a bloc for the clause allowing religious exemptions to continue.

There were eight MPs who voted against the bill in its entirety, including the Liberals' Bernie Finn, Inga Peulich, Gordon Rich-Phillips and Richard Dalla-Riva.

Mr Finn told Parliament he did not want to go back to the bad old days of "poofter bashing", but did not support the idea because it was not in the interests of children.

"I do have and have had over the years many gay friends," Mr Finn said.

"When I think about some of the more enjoyable gatherings over the years they have often been as a result of the input of one or more of those friends who are quite often very talented, have a certain flair, a way with words and are, generally speaking, very funny."

Ms Carling-Jenkins said the bill should not be about the rights of the parents but the rights of children, "not about creating a market for children".

Victorian Gay and Lesbian Rights Lobby co-convenor Sean Mulcahy said he said he was disappointed that the clause to remove exemptions for religious organisation was defeated.
 
"If the Legislative Assembly accepts this amended bill, same-sex couples seeking to adopt may still be rejected by religious organisations based purely on their gender identity or sexual orientation," Mr Mulcahy said. "That's not equality."

Dan Flynn,  Victorian director of the Australian Christian Lobby, praised those MPs who had voted for the amendment, calling in an extraordinary attack on freedom of religion in Victoria.

"CatholicCare adoption has survived a significant government attack and will be able to continue to prefer to adopt children to a mother and father rather than a same-sex couple."