In a 3-0 ruling, the court rejected a suit filed by 55 University of California applicants and an advocacy group called By Any Means Necessary, the San Francisco Chronicle reported Tuesday.
The plaintiffs, supported by Gov. Jerry Brown, argued that the legal rationale for California's Prop. 209 had been undermined by developments since its passage in 1996.
Among developments the lawsuit cited was a 2003 U.S. Supreme Court ruling allowing universities to consider applicants' race as a factor in promoting campus diversity.
In Monday's appeals court decision, Judge Barry Silverman noted that the high court has granted a review of a Texas case that could lead to a nationwide ban on preferential treatment of minorities.
California's Prop. 209 bars state and local agencies from considering race or gender in employment, contracting and education.