A Chinese court has heard what is believed to be the country's first lawsuit over gay workplace discrimination, in a case that could have wide repercussions.

The plaintiff was fired from his job after he was revealed as gay in a viral online video, and his action was heard last week by the Nanshan District People's Court in the southern metropolis of Shenzhen.

"We're very optimistic," Liu Xiaohu, a lawyer for the plaintiff, told AFP, adding that the case "will definitely have an impact" on views of gay rights in China.

The Communist government only decriminalized homosexuality in 1997, and listed it as a mental illness for another four years.

More recently tolerance has grown in larger Chinese cities, but conservative attitudes remain deeply engrained and workplace discrimination against gays and lesbians is common.

The Shenzhen case was filed in November by a man using the pseudonym Mu Yi.

It is the first of its kind in the country, according to the China office of rights group PFLAG.

Mu, who is gay, was filmed by police in October arguing with another gay man on a Shenzhen street. The video went viral soon after it was posted online, with some users making their own videos playing on a speech made by the other participant in the dispute, who was wearing a "little red hat".

A week later, Mu was fired from his job as a designer.

Mu sued in November, claiming that his employer fired him because the video revealed him as gay.

The employer maintains that Mu's firing was not linked to his sexual orientation, and says it dismissed him for reasons including his "poor service attitude" and improper attire, according to the Guangzhou-based Yangcheng Evening News.

Mu is seeking an apology as well as 50,000 yuan ($8,000) in compensation, the outlet said.

A decision on the lawsuit -- which has become known as the "Little Red Hat" case -- is expected within the next three months, Liu said. (AFP)