The court ruled that the Israeli army had the right to deport Berlanty Azzam, 22, from Bethlehem in the West Bank to the Gaza Strip.
The Israelis say Ms Azzam holds a
Diamond Core BitsGaza ID card and entered the West Bank illegally.
She was due to finish her studies in business management later this month.
"I am very disappointed, and I don't understand why Israel is preventing me from continuing my studies," Ms Azzam said, quoted in a press statement issued by the Israeli human rights group Gisha on Wednesday.
The court was reported as ruling it could not dismiss the fact that she had resided in the West Bank illegally for four years.
She was in breach of the pass given to her at the time allowing her cross between the Gaza Strip and the West Bank for religious purposes only, not study.
Without a student pass, the court had "no choice but to rule
Diamond Core Bitsthat she stayed in the West Bank illegally. Her schooling is not a sufficient reason for this court to rule in favour of her return," Israel News quoted the three-judge panel as ruling.
Blindfold
Ms Azzam was stopped at a checkpoint in the West Bank by Israeli
Louboutinsoldiers at the end of October.
When they saw that the address listed on her identity card was in Gaza, she was detained for six hours, then blindfolded, handcuffed and told she would be taken to a detention centre in the southern West Bank.
After the car stopped and the blindfold was lifted, she saw she was at the Erez crossing to Gaza. She was then forced to enter the territory without being given the chance to speak to a lawyer.
Gisha warned that if Ms Azzam's deportation were permitted, an estimated 25,000 Palestinians living in the West Bank who had Gazan addresses on their identity cards risked being removed.
They say Israel has raised no security concerns about Ms Azzim.
The human rights group said lawyers acting for Israel in the case did not provide any evidence to the court to show Ms Azzim was in the West Bank illegally.
She travelled to the university in 2005 on a valid entry permit and then made every attempt to change her address through the correct channels, the organisation said.
"I cannot imagine why the state of
Diamond Core BitsIsrael is so insistent on preventing Palestinian young people, against whom it makes no security claims whatsoever, from accessing higher education," Gisha lawyer Yadim Elam said.
The Israeli government did
Louboutinnot immediately comment on the decision of the court.