The verdict on Thursday, allowing police to move on or arrest those in the forecourt, comes after police challenged the Palestine Action Group's proposed protest in the NSW Court of Appeal.
Organisers believed Sunday's march would see around 40,000 people wind through Sydney's city centre to the steps of the famed landmark.
Justice Stephen Free said a protest of that size would have "given rise to a risk of crowd crush", a unanimous view of the court, he said.
Judges had raised concerns over crowd safety during earlier hearings.
Comparing the protest to a massive August rally at the Sydney Harbour Bridge, where between 90,000 and 300,000 marched in the rain, Chief Justice Andrew Bell said even more could attend Sunday's event.
He also noted Macquarie Street could become a "narrow funnel" that pushes protesters into a tight space.
But the organiser's barrister, Felicity Graham, said previous non-ticketed events at the Opera House, like popular light show Vivid, were managed capably.
In the 1990s, Australian-New Zealand band Crowded House performed on the steps of the Opera House to a crowd of 100,000 people, Palestine Action Group noted in a post on social media.
NSW has a permit system that allows protest participants to block public roads and infrastructure unless a court denies permission after a police challenge.
A snap protest was staged on the storied building's forecourt in the days following the October 7 attack where an Israeli flag was burned and anti-Semitic chants shouted by a few protesters.
Palestine Action Group has been organising weekly rallies for two years since Israel's military assault on Gaza began in 2023.
There were 1200 people killed after Hamas staged a surprise attack on Israel on October 7, 2023.
The subsequent war has already killed more than 67,000 Palestinians, according to Gaza's Health Ministry.
19°C