Chief Justice Aharon Barak and Justice Yitzhak Zamir ruled that the two petitioners had not proved that the presence of Muslims praying under the Temple Mount harmed the feelings of Jews, who also consider the site holy.
Justice Eliezer Goldberg, who dissented, said Jewish sentiments could be hurt by the continued operation of the mosque.
The mosque, which opened in December, is located beneath the Temple Mount in the site known as Solomon’s Stables.