Police barred Ai Weiwei from attending court in Beijing’s Chaoyang district to hear the verdict delivered.
Tax authorities imposed a 15 million yuan ($2.4 million) fine on Ai Weiwei’s firm for tax evasion in 2011.
Supporters say the fine is politically motivated and Ai Weiwei wanted the court to overrule the penalty.
”We will keep appealing, until the day comes when we have nothing to lose,” Ai Weiwei said via Twitter.
His lawyer Pu Zhiqiang, who was in court for the verdict, told reporters that the ruling was ”totally without reason”.
The artist, a outspoken critic of the government, was detained for almost three months without charge last year.
After he was released, he was accused of tax evasion and the fine imposed.
The Chinese authorities maintain that the firm, called Fake Cultural Development, owes them money and it must be paid back.
While Ai weiwei is a designer for Fake Cultural Development, his wife is the legal representative of his company.
The artist said earlier that police, stationed outside his home, had barred him from attending the court hearing.
”If I can’t even appear in court, what more does this country have to do with me?” he said over Twitter.
Security was tight at the court with reports of both uniformed and plainclothes police in the area and people, including journalists and diplomats, being turned away.
Ai Weiwei, 55, has said that the tax bill is pay-back for his activism and challenged it on the grounds that proper procedure had not been followed.
The Beijing court agreed to hear the case, in a surprise move.
“The entire judiciary is shrouded in darkness,” he said from his home in northeast Beijing after the verdict.
Born in 1957 in Beijing, Ai Weiwei, the son of one of China’s most famous poets, Ai Qing, has played a key role in contemporary Chinese art over the last two decades.
His involvement in the design of Beijing’s “Bird’s Nest” Olympic stadium brought him international prominence.
But he fell out of favor with authorities with his outspoken criticism over the Olympics and the devastating May 2008 Sichuan earthquake.
In December 2010, he was among a group of activists and critics banned from travelling. A month later, his studio in Shanghai was demolished after officials said he had failed to obtain planning permission for the building.
He was then detained in April 2011 at Beijing airport.
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