"The court in the Siberian city of Tomsk has dismissed the plea," Sadhu Priya Das of Moscow ISKCON said soon after the verdict was announced.
State prosecutors in the Siberian city of Tomsk had filed an appeal against a lower court's dismissal of their original plea seeking a ban on Bhagavad Gita As It Is, written by A C Bhaktivedanta Swami Prabhupada, the founder of the International Society for Krishna Consciousness (ISKCON).
They claimed that the text was "extremist" literature full of hatred and insult to non-believers which promoted social discord.
The higher court in Tomsk "kept the verdict of the lower court intact," a joyful Das said.
As the judge dismissed the plea, the followers in the packed courtroom burst into applause, he said.
"We are grateful to the Russian judicial system," Mr Das said.
Brajendra Nandan Das, Director ISKCON media communication in India, expressed happiness over the verdict. "We have won. The petition seeking a ban on the book has been dismissed."
The case had drawn a flurry of criticism from Hindus across the world.
When the petition was dismissed by the lower court in Tomsk on December 28 last year, India had welcomed the verdict as a "sensible resolution of a sensitive issue".
The original petition seeking a ban on the translated version of the holy scripture was filed in June 2011 and the trial prompted sharp reactions from across the world.
External Affairs Minister S M Krishna had asked the Russian government to help resolve the issue quickly.
Bhagavad Gita was first published in Russia in 1788 and since then it has been republished many times in various translations.