* Decree bans sales of affected books close to churches
* PM Orban on collision course with EU, rights groups
* Order spells out implication of new school law (Uses wording of the decree in the lede)
BUDAPEST, Aug 6 (Reuters) - Hungary ordered shops on Friday to sell children's books seen as promoting homosexuality in "closed wrapping", stepping up restrictions that have set Prime Minister Viktor Orban on a collision course with rights groups and the European Union.
The decree also included books seen as promoting gender change and containing "explicit" depictions of sexuality. It told shops to sell them separately and banned any sale of them at all within 200 metres of a school or a church.
The order is the first of what is expected to be a series of directives spelling out the implications of a law passed in June banning the use of materials seen as promoting homosexuality and gender reassignment at schools.
The European Commission has launched legal action against Orban's nationalist government over the legislation, saying it is discriminatory and contravenes European values of tolerance and individual freedom.
Orban, in power since 2010 and facing a challenging election next year, has grown increasingly radical on social policy in a self-proclaimed crusade to safeguard what he says are traditional Christian values from Western liberalism.
In July Hungary fined the distributor of a children's book about same-sex "rainbow families" under a law that bans unfair trade practices.
Orban's government says the new law is meant to protect children and leave it up to parents to educate them about sexuality.
Several rights groups have said the law wrongly conflates paedophilia and pornography with LGBT issues. Ursula von der Leyen, head of the EU's executive Commission has called it a "disgrace".
An Ipsos poll last month found that 46% of Hungarians support same-sex marriage. Last month thousands of Hungarians joined the annual Budapest Pride march to protest against the law.
The European Commission's legal action against Hungary and a separate move against Poland are the latest salvo in a clash of cultures between Brussels and some of the EU's newest members in eastern Europe over a range of core issues including the rule of law and press freedoms. (Reporting by Krisztina Than; Editing by Andrew Heavens)
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