The council’s decision allows the maximum number of permitted flights to increase from 91,000 to 120,000 per year.
Residents opposed to the increase argued the council had failed both to consider changes to Government policy on climate change and to properly consult neighbouring boroughs.
Lord Justice Pill and Mr Justice Roderick Evans rejected both claims and dismissed the legal challenge.
Campaigners were represented by Friends of the Earth’s Rights and Justice Centre in their court action.
Chair of local campaign group Fight the Flights Anne-Marie Griffin said her group were “desperately disappointed by this judgement” and said they were considering appealing against the decision.
Friends of the Earth’s London Campaigner Jenny Bates said expansion at the airport would “have a terrible impact on local people’s quality of life, as well as increase air pollution breaches and undermine efforts to tackle climate change.”
Green Party politician Darren Johnson said he was “extremely disappointed that the court did not support the residents’ challenge.”
Richard Gooding, Chief Executive of London City Airport said, he was “delighted” with the ruling.
Mr Gooding said the increase in flights “will allow us, and our partner airlines, to continue our key role in supporting the local, regional and national economies and providing new local employment and training opportunities.
“The decision also enables us to continue supporting the much needed regeneration and investment which London City Airport has helped bring to East London over the past 23 years.”
London Liberal Democrat MEP Sarah Ludford said the court’s “rejection of a very strong case” meant residents “will have to endure ever-increasing noise levels while London City Airport sends ever more planes into the sky to pollute London’s air and wreck the global environment.”
