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* Sister Margaret Farley is professor emeritus at Yale Divinity School
* Vatican says her 2006 book is at odds with Catholic teaching
* Vatican says masturbation is "gravely disordered action"
By Philip Pullella
VATICAN CITY, June 4 (Reuters) - The Vatican criticised a popular American nun on Monday, saying her book on sexual ethics, including topics such as masturbation and homosexuality, contradicted Catholic teaching and must not be used by Catholic educators.
The Vatican's doctrinal department, the Congregation for the Doctrine of the Faith, issued a stern "notification" about Sister Margaret A. Farley, a member of the Sisters of Mercy and a professor emeritus of Christian ethics at Yale University.
The Congregation sharply criticised Farley, saying her writings manifest a "defective understanding of the objective nature of natural moral law".
Two months ago the Vatican issued a stinging report saying the umbrella body representing most American Catholic nuns promoted radical feminist ideas and sometimes challenged bishops.
Monday's notification, signed by department head Cardinal William Levada, an American, and approved by Pope Benedict, sharply criticised Farley's award-winning 2006 book "Just Love, a Framework for Christian Sexual Ethics".
Specifically, the Vatican rejected her views on four subjects, masturbation, homosexual acts, homosexual unions and remarriage after divorce.
Farley writes that masturbation, particularly in the case of women, "usually does not raise any moral questions at all" and that it "actually serves relationships rather than hindering them".
The Vatican said the Church teaches that masturbation is "an intrinsically and gravely disordered action".
Farley writes that "same-sex oriented persons as well as their activities can and should be respected". The Vatican notification reminded her that while homosexual tendencies are not sinful, homosexual acts are "intrinsically disordered (and) contrary to the natural law".
Farley writes that homosexual marriage can help reduce hatred, rejection and stigmatization of gays. The Church opposes gay marriage.
The Vatican said Farley's positions "are in direct contradiction with Catholic teaching in the field of sexual morality" and warned the faithful that her book "is not in conformity with the teaching of the Church".
It also banned the use of the book by Catholic educators.
When the book was published in 2006, America, the weekly magazine of the Jesuit order in the United States, called its contents "an important message in a time in which sexual abuse and violence are rampant and the Catholic Church has failed to protect children from sexual exploitation".
In 2008, the book received the prestigious Louisville Grawemeyer Award for books on religion.
Nuns in the United States are still feeling the sting of a report by the same Vatican department in April that criticised them as being feminist and politicised.
It was issued after a Vatican investigation determined that the Leadership Conference of Women Religious (LCWR), whose 1,500 members represent some 80 percent of about 57,000 American nuns, had "serious doctrinal problems" and promoted "radical feminist themes incompatible with the Catholic faith".
That report, which also criticised the LCWR for sometimes challenging bishops, shocked most American nuns and led to an outpouring of popular and editorial support for them and their work among the poor, and in schools and hospitals. (Reporting By Philip Pullella; Editing by Tim Pearce)