Lola Cashman had told Dublin's High Court that the band's frontman, Bono, had given her several items as gifts during the band's hugely successful Joshua Tree tour in 1987.
An iconic Stetson hat, a pair of metal hooped earrings, a green sweat shirt and a pair of black trousers all worn by Bono were among the disputed items Cashman claimed she had been given.
But after a protracted legal dispute that saw Bono take to the witness box, judge Michael Peart ruled that on the balance of probability, the items had not been given to her as she had claimed.
The group's lawyer, Paul Sreenan, said they would not be pursuing costs against Cashman for the appeal or an earlier circuit court action she lost last year.
Neither U2, who are currently on tour in Australia, nor Cashman were in court for the ruling, reports AP.
A lower Irish District Court ruling last year rejected Cashman's defense and ordered her to return all the items to the band, whose net fortune is estimated in excess of Ђ600 million (US$800 million).
U2 filed the suit against Cashman after she tried to sell the clothes and photos at a London auction house in 2002. She further angered the band with her 2004 book, "Inside the Zoo With U2: My Life With the World's Biggest Rock Band."
During her 2005 testimony, Cashman claimed that Bono had handed over the Stetson and other items while dancing about in his underwear backstage following a concert in Phoenix, Arizona.