The Tories' Bill 10 also revokes the right of parents to pull their children out of class if sexual orientation is discussed, said Sandra Jansen, the backbench MLA sponsoring the bill.
"We're moving forward incrementally," said Jansen, a longtime advocate of LGBTQ issues. "We have to get everybody on the same page on this."
Jansen said the government will push to raise awareness of gay-straight alliances with school boards.
"We are continuing to have those conversations and I believe at the end of the day we're going to get to the point where there is no school in the province that will refuse (the alliances)."
The bill was signalled last week by Prentice as a way to settle what he said was becoming a polarizing and unfairly divisive debate over how the province treats homosexuals.
The bill will amend Alberta's Bill of Rights to make it clear that Alberta respects the gay community but also respects parental rights.
To that end, it will allow students to form gay-straight alliances in schools but will give schools the final say on whether to allow them. If the school says no, students can appeal to the school board, and finally to the Court of Queen's Bench.
Gay-straight alliances are student-led support networks to help gay students gain support and friendship. Statistics show that the alliances help reduce suicide among gay youth.
Earlier Monday, Dirks told the house there are 94 gay-straight alliances in Alberta. The opposition Liberals said none of those are in faith-based schools, private schools or in rural areas.
The bill also amends a controversial section of Alberta's Human Rights act that allows parents to pull students out of class when sexual orientation is taught.
Critics say the "sexual orientation" phrase stigmatized the LGBTQ community by implying it was a topic to be shunned.
Bill 10 was hurriedly drafted last week amid growing support for Liberal Laurie Blakeman's private member's bill, Bill 202.
Bill 202 would have given students the automatic right to create gay-straight alliances and, like Bill 10, would also no longer allow parents to pull children out of class when sexual orientation was taught.
Blakeman said Bill 10 will bump her bill off the Order paper because two bills on the same issue can't be debated in the house.
She said the government is catering to the demands of a small and vocal lobby group of home schoolers.
She added she was appalled by the talk of "incremental" progress on people's fundamental human rights.
"When human rights arguments are given that way, you just have to say, 'What is wrong with you people?' " said Blakeman.
"Seriously, what is wrong with you people that you are afraid of a group being extended a human right? I don't understand that."
NDP Leader Rachel Notley said Bill 10 entrenches inequality and suggested Prentice's government is becoming more socially conservative.
"This bill does nothing to help (gays and lesbians) and in fact it crystallizes the fact that those who don't want to help them will continue to be allowed to do so," said Notley.
The issue has become a litmus test of tolerance in Alberta.
In the spring, a coalition of Progressive Conservatives and Wildrose members joined forces to vote down a Liberal party motion urging the government to support gay-straight alliances in all schools.
The NDP, the Liberals and some Tories, including Jansen, voted for the motion.
"Students have to have the freedom to decide if a gay-straight alliance is needed in their school," said Jansen at the time. "It's not a question of sexuality as much as it is a question of the right to free speech and free assembly."
Jansen said Monday she still stands by those comments.
ALSO ON HUFFPOST: