The Rossellini work that would have an even greater international impact was the second section of L’Amore, "The Miracle” ("II Miracolo”), following Cocteau’s "La Voix humaine” segment. With Tullio Pinelli and a young actor named Federico Fellini, soon to become one of the most important directors of the postwar Italian cinema, Rossellini co-wrote the story of a tramp (Fellini) who has an affair with a mentally unbalanced woman; when she gives birth to a son, she says he is the Messiah. The Catholic Church responded by mounting an aggressive campaign against the film. After it was finally released in the United States in December 1950, the New York State Board of Regents succeeded in banning it on the grounds that it was sacrilegious. But the film’s American distributor took the case all the way to the Supreme Court, which in 1952 decided that the Regents’ ruling had violated the separation of church and state.

This decision was enormously important for the future of motion pictures, because it was the first time that the medium had been ruled to be protected by the First Amendment to the Constitution. In 1915 the Supreme Court had ruled in a similar case that motion pictures were merely a form of interstate commerce, and as such were guaranteed no free-speech protection under the Constitution. Known as the Mutual Decision, that ruling had made it easier for the Hays/Breen office to control the production and exhibition of motion pictures. Now, in a single stroke, much of the Production Code’s authority had been stripped away. It would be more than another decade before the Code collapsed completely, but the "Miracle” Decision of 1952 was a major step on the road to artistic freedom for the cinema.

Meanwhile, similar trouble was brewing in Italy, even as Neorealism was becoming influential internationally. In 1949, the Andreotti Law attempted to halt the production of films, specifically those of the Neorealist school, that did not serve "the best interests of Italy,” and to remove state subsidies from films that failed to depict a thriving postwar Italian state. In some cases, the law even denied export licenses for international distribution. Many filmmakers found a way around the restrictions, but as the national economy regained its footing Italian producers and audiences began to turn to more traditional fare. As the 1950s dawned, new court rulings, technological advances, and changing audience tastes forced the studios to adapt in order to survive.