An employment tribunal has ordered the council to pay James Robertson £807 - two weeks pay - for breach of contract after he was fired for gross misconduct.
Mr Robertson was dismissed in July 2001 after he attacked a man in a Preston restaurant with an axe, for which he was sentenced to five years.
After being found guilty, the court heard he had been jailed in 1971 for the murder of a man in Glasgow and had been released on licence in the early 1980s. After the latest attack he was recalled to resume his life term.
Before Christmas, he was also found guilty of the attempted rape of an 18-year-old woman in 2000.
Jim Carr, Preston's chief executive, said the council was shocked and disappointed with the tribunal's decision. It believed it acted properly and in accordance with its own procedures.
'Our decision to dismiss Jim Robertson was based on the council's overriding concern to protect the public and its own staff.
'We believe that in dismissing Jim Robertson, who worked with the public in the course of his duties, we made the right decision for the right reasons.
'We're considering our options, but must weigh up whether it's worth appealing,
given that it will cost more than the £807 awarded to launch an appeal.'
Mr Robertson argued at the tribunal that he was sacked without notice, claiming he did not get a fair hearing during disciplinary proceedings.