The manufacturers -- BAT, Philip Morris, Imperial Tobacco, Gallaher, French manufacturer Societe Nationale and vending machine operator Cherwell Tobacco -- were contesting the 2002 Tobacco Advertising and Promotion Act, which limits the size and location of promotional material in shops.
The judge presiding over the case, Mr Justice McCombe, told the court of the health and economic risks smoking causes to society, which can only be amplified by advertising.
The law effectively means that the size of the ads now is so small and the location so restricted that they can not be used by more than one brand at a time.
Deborah Arnott, director of Ash, the health charity that campaigns against smoking, welcomed today's decision.
"The ruling may also assist other countries that have not yet banned tobacco advertising," she said.
"The evidence that tobacco advertising encourages young people to smoke is well established. Therefore, a ban is a proportional response to the marketing of a deadly addictive drug."
David Pannick, QC for the tobacco firms, argued that the rules were so tough they amounted to an effective ban on informing consumers about products that were legally on sale and that new brands were unable to establish themselves on the market under current laws.
Pannick also claimed that when the law was passed, health secretary Dr John Reid had not properly considered whether imposing tighter restrictions would protect young people from the risk of smoking. Reid is fighting calls for the law to be reviewed.
The point-of-sale regulations will come into force on December 21 2004. The judge gave the tobacco companies leave to appeal.
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