The European Court of Human Rights said the case was inadmissible because activist Gareth Lee had failed to "exhaust domestic remedies" in his case against a Northern Ireland bakery.
It was the latest ruling in a long-running legal battle that began in 2014 when Ashers Baking Co. refused to make the cake Lee wanted.
The owners argued they were happy to bake goods for anyone but would not put messages on their products at odds with their Christian beliefs.
Britain's Supreme Court ruled in 2018 that the bakery's refusal did not amount to discrimination, reversing a lower court's ruling.
Lee then took his case to the Strasbourg, France-based human rights court, arguing that the UK Supreme Court decision breached the European Convention on Human Rights.
In a written ruling, the rights court said it could not rule because Lee had not raised the convention in his UK court actions.
"Because he had failed to exhaust domestic remedies, the application was inadmissible," the Court of Human Rights said.
LGBTQ support group the Rainbow Project called the ruling disappointing.
"When a commercial business is providing services to the public, they cannot discriminate against their customers or clients on any grounds protected by equality law," John O'Doherty, the group's director, said.
He said the 2018 UK Supreme Court ruling created legal uncertainty throughout the country.
"Unfortunately, with today's decision, that uncertainty will remain," he said.
The Christian Institute, which had backed the legal fight of the McArthur family that runs Ashers Baking Co., welcomed the ruling, which a spokesman called "good news for free speech, good news for Christians, and good news for the McArthurs."
"The UK Supreme Court engaged at length with the human rights arguments in this case and upheld the McArthurs' rights to freedom of expression and religion," spokesman Simon Calvert said."
