The Catholic University of Eichstaett (KU) has been operating for months without a head after Gregor Maria Hanke, the bishop of Eichstaett, refused to appoint a principal who had been nominated by the university's professors.
The university in Germany's Bavaria state has about 4,500 students and teaches regular arts, science and business courses.
This week, the bishop, with express backing from other Bavarian bishops, also suspended the university's administrative head and appointed two temporary new chiefs, saying a fresh start was needed.
Refuge of faith
Whereas the church sees its university as a refuge of faith in a nation that is increasingly hostile to religion, professors have painted the struggle as a battle for academic liberty and autonomy, as claimed by universities around the globe.
Interest in the dispute has been heightened by the fact that Pope Benedict XVI is a Bavarian and was a formerly a professor in the state, at a different university, Regensburg. The Vatican has not spoken out about the row.
Unlike at theology colleges, students do not have to be Catholic to attend KU. As at most German state universities, the tuition fees are minimal compared to those in most western nations.
To some, the row brings back memories of the Vatican's desire in 1979 to remove the dissident Swiss-born theologian Hans Kueng from his professor-of-theology post at the German University of Tuebingen.
However the man at the center of the latest tussle, Ulrich Hemel, is not a theologian but a business executive whose main academic subject has been the religious formation of children.
Hemel was chosen by Eichstaett professors to become "president," a German university's top academic official, earlier this year, but Bishop Hanke flatly refused to bless Hemel's appointment and certification needed by Hemel from the Vatican never arrived.
Newspapers speculated that the bishop was disturbed by the fact that Hemel had been married three times, but whatever the origin, it is clear that the bishop and Hemel have an irreconcilable antipathy.
The bishop's stated objections to Hemel include an accusation that Hemel blabbed to the media after they talked.
The Catholic newspaper Tagespost quoted Bishop Hanke, who is grand chancellor, or ceremonial chief of the university, saying Hemel had never been a full professor and had no recent scholarly publications.
There are Catholic universities in the United States, but KU, founded in 1980, has a uniquely German form of government.
The university, with most of its campus in the Bavarian town of Eichstaett and a business school in the bigger industrial city of Ingolstadt, is mainly funded by the state of Bavaria, with the state's bishops contributing 15 per cent of the budget.
The row has escalated, with suggestions of intrigue and plots rattling the provincial calm at Eichstaett.
The conflict reached a head with two senior academics resigning and a bitter joint open letter last week from students and senior professors attacking the "unprecedented" church interference.
Professors, who have life tenure and huge power in the German university system, often argue that academic research should be driven by a scholar's interests rather than the demands of society.
The bishop has ordered a financial audit of recent spending by the chief executive, Gottfried von der Heydte, who shared control of the university with its president. The bishop said he would not make his suspicions public.
TV news crews filmed the grey-suited auditors arriving, sending away von der Heydte's assistants and staying late into the night to search computer and paper files. Professors received letters forbidding them to speak with von der Heydte.
Bishop Hanke said the route out of the conflict was the installation of two outside, neutral academics who would be tasked from July 1 with overseeing a fresh start.
"This is like a marital conflict," he said. "It's best to get a third party to help you."
The Munich newspaper Sueddeutsche Zeitung said the academic credentials of the two trouble-shooters chosen by the bishop, retired sociologist Rudolf Fisch and historian Gert Melville, had impressed some professors, so the duo might be able to bridge the differences.
On Wednesday, the professors backed off from further conflict, issuing a joint statement that they were confident the new management would put the university back on the right track.
Hanke also met this week for two hours with student leaders, who said both sides were optimistic about the university's future.
Bishop Hanke, who took office in November 2006, has said the trouble-shooters will oversee a hunt next year for a new president.
Doctrinal issues have not been raised in the dispute, but the archbishop of Munich, Reinhard Marx, indicated this week that bishops want the university to adopt a more Catholic "character" in future.