Prosecutors have accused the party's branch in Krasnodar of disseminating literature inciting violence. The party has dismissed the charge as political, and part of a Kremlin clampdown on dissent.
"The court did not accept the party's appeal on Tuesday, and upheld the warning that its extremist activity is unacceptable," local prosecutors said.
Prosecutors said citing "linguistic analysis" that books written by Andrei Piontkovsky, a prominent Russian political analyst and Kremlin critic, and allegedly distributed by the party, incited violence and ethnic conflict.
The party branch's leader, Vladimir Rakhno, earlier linked the move to Yabloko's election campaign: "Some people do not like Yabloko's activities in the run-up to the elections."
Russia will hold parliamentary polls in December, which are expected to be dominated by pro-Kremlin forces.
Piontkovsky, a senior Yabloko member, has authored books entitled "For the Motherland! For Abramovich! Fire!" and "Unloved Country." He said the works contained articles that had already been published, and that there were no legal grounds for prosecuting the party over the books.
He called the situation a "logical evolution" of President Vladimir Putin's regime "into totalitarianism." He also said the new law on extremism, last amended in July, now allows the Kremlin to do away with its political opponents, by branding them extremists.
Piontkovsky told Ekho Moskvy radio: "The law, which stipulates up to 15 years in prison [on extremism charges], allows the prosecution of any opposition politician, journalist or writer. Those books ... contain severe criticism of the Putin regime, but accusations of inciting ethnic conflict are totally absurd."
Initially the court backed Yabloko, dismissing the warning as illegal, but prosecutors contested the original ruling. The party said it would appeal the decision in a higher-instance regional court.
