Assange has always refused to travel to Stockholm for questioning over the rape allegation, which he denies, due to concerns Sweden will extradite him to the United States over WikiLeaks' release of 500,000 secret military files on the wars in Afghanistan and Iraq.
The 45-year-old Australian sought refuge in the Ecuadorian embassy in London in June 2012 after exhausting all his legal options in Britain against extradition to Sweden.
Friday's ruling marked the eighth time the European arrest warrant has been tested in a Swedish court, with all seven previous rulings having gone against him.
TIMELINE: Key points in the Julian Assange case
Svea Court of Appeals announced in the decision, released at 11am, that Assange remains “detained in absentia”.
It rejected claims by a UN panel earlier this year that he was arbitrarily detained in the embassy, saying that it “shares [Stockholm] District Court's assessment that Julian Assange cannot be deemed to be unable to leave the Embassy of Ecuador in London”.
“Therefore his stay, as such, is not to be regarded as an unlawful deprivation of liberty and shall not be given any importance in its own right in the assessment of proportionality,” it said, adding that for this reason his health status, which it has been claimed is poor, was of limited importance to its decision.
Since entering the Ecuadorian embassy, Assange has categorically refused to travel to Sweden. In March 2015, Swedish investigators eventually agreed to question him in London, fearing the case being dropped. Some of the allegations have already expired.
In a statement the appeals court criticized investigators' “earlier passivity” in not seeking alternative routes prior to this and suggested that as well as the over five-year detention period could have constituted a reason to throw out the arrest warrant.
However it noted that the case had moved forward since. Ecuador has agreed to allow an interrogation to take place in London from October 17th, and Swedish prosecutors have accepted the conditions.
“So it is seen that in the past period of just over one year the prosecutor has worked actively to move the investigation forward and has also accepted alternative investigative methods. In the view of the Court of Appeal, there is no reason to question the information that an interview with Julian Assange can be held in the next few months,” the court stated.
It concluded: “The public interest of the investigation being able to continue carries great weight. In view of that and of the risk that Julian Assange will evade legal proceedings if the detention order is set aside, the reasons for continued detention outweigh the intrustion or other detriment that the measure entails for him.”
Swedish prosecutor Marianne Ny, who is running the investigation, welcomed the decision.
“The public interest in having the investigation proceed in our opinion still carries a lot of weight. The court has shared our opinion that upholding the arrest warrant is in line with the principle of proportionality,” she said in a statement.
The WikiLeaks founder's legal representative Per Samuelsson criticized the court for “once again playing down Julian Assange's living situation at the embassy. The Court of Appeal only looks at the case from one side and not at the complete picture, which is that the Americans are after him”.
“If he leaves the embassy he loses his political asylum and exposes himself to the risk of being extradited to the US, where there is an ongoing criminal investigation against him,” he told public broadcaster SVT, adding that they would likely appeal the decision to Sweden's Supreme Court.
The statute of limitations on the rape allegation expires on August 17th, 2020.