By a 7-0 margin, the Supreme Court upheld a 2009 decision by Peter Van Loan, then the public security minister, to reject the man's application on the grounds he was inadmissible in the national interest.
Muhsen Ahmed Ramadan Agraira came to Canada on a false Italian passport in 1997 and originally claimed refugee status because he was a member of the Libyan National Salvation Front - a group that opposed dictator Moammar Gadhafi.
His claim was rejected in 1998 because his application was not deemed credible and was against the country's national security interests.
He married a Canadian woman in 1999, who sponsored him for permanent residency.
The Supreme Court says Agraira still has one remaining option to stay in Canada - to reapply under humanitarian and compassionate grounds.
© 2013 The Canadian Press