Yousaf claims that Little Scholars Day Nursery, in Broughty Ferry near Dundee, rejected three applications for children with Muslim names, including his two-year-old daughter Amal, but those with "white Scottish-sounding names" were accepted.
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Last week, the politician and his wife Nadia El-Nakla called on the Care Inspectorate to carry out an investigation over the claims which the nursery “strenuously denies”.
The couple’s solicitor Aamer Anwar has now written to the nursery, citing the Equality Act 2010, giving owners 14 days to provide settlement proposals, a public apology and compensation to an anti-racist charity of their choosing or an action will be raised at Dundee Sheriff Court.
The couple said in a joint statement: "Despite being given ample opportunity, Little Scholars Day Nursery in Broughty Ferry have failed to admit, explain or apologise for their discriminatory behaviour.
"We have both stood against hatred our whole lives, often being the targets of vile abuse.
"We will not accept our children being discriminated against by anyone. Like any other parents we simply want our children to be treated equally, regardless of their colour of skin or religion.
"We strongly believe we have evidence of systemic discrimination being carried out by Little Scholars Day Nursery.
"As passionate believers in the fairness of Scotland's justice system, we have now instructed our solicitor, Aamer Anwar, to initiate court proceedings and are determined to fight for justice for our daughter."
A spokesperson for Little Scholars said: “We have received correspondence from a solicitor acting for Mr Yousaf and Ms El-Nakla and will respond in due course.
“Little Scholars is extremely proud of being open and inclusive to all and we are deeply saddened that anyone would think otherwise. Our owners are themselves of Asian heritage, and for more than a decade we have regularly welcomed both children and staff from a range of different religious, cultural, ethnic and racial backgrounds.”
