Harry, King Charles' younger son, had brought the action against the government at the High Court in London after the Home Office - the ministry responsible for policing - decided in February 2020 that he would cease to automatically receive personal police security while in Britain.
Harry, along with other senior royals, had received full publicly-funded security protection provided by the state before he stepped back from his royal duties and moved to California with his American wife Meghan in March 2020.
After being granted permission for a judicial review of that decision, his lawyers told a hearing in December that the decision to take this away subjected him to unlawful, unfair and unjustifiable treatment.
But the government's legal team said the Executive Committee for the Protection of Royalty and Public Figures, known as RAVEC, had not decided Harry should not receive protection, but that he should not have it on the same basis.
The High Court agreed, concluding that there had been no unlawfulness in the decision.
"We are pleased that the court has found in favour of the government’s position in this case, and we are carefully considering our next steps. It would be inappropriate to comment further," a spokesperson said, adding the protective security system was "rigorous and proportionate".
Harry was last in Britain earlier this month when he made a whistle-stop visit to see his father after it was revealed the king had been diagnosed with an unspecified form of cancer.
The prince, who has become estranged from his family since his move to the U.S., has said he hoped Charles' illness could bring the family together.
Wednesday's ruling marks his second legal defeat on the issue of his security after the High Court ruled against him in a separate challenge against the government's refusal to let him pay for his own police protection.
The prince has often spoken out about his fears for the safety of his family, and has regularly hit out at press intrusion which he blames for the death of his mother Princess Diana, who was killed when her limousine crashed as it sped away from chasing paparazzi in Paris in 1997.
Britain's former counter-terrorism police chief said last year there had been credible threats made against the couple by far-right extremists.
The ruling comes as the government announced an extra 31 million pounds ($39 million) on Wednesday to provide new security provisions for lawmakers and other officials amid growing concerns about their safety.
