The Holocaust survivors filed the lawsuit in federal court in San Francisco in 1999 accusing the defendants of receiving property stolen from victims of the Ustasha regime from 1941 to 1945.
The lawsuit claimed that the stolen property was used after the war to help Nazi war criminals escape from Europe to South America, Reuters said, adding that the lawsuit sought compensation for the monetary losses suffered by Holocaust survivors.
The Vatican Bank, the financial arm of the Roman Catholic Church, and the religious order founded by St. Francis of Assisi have denied the claims.
A federal judge dismissed the lawsuit in 2003 on the grounds that the claims involved questions that should be handled by the executive or legislative branches of the U.S. government, not by the courts.
But the appeals court disagreed and ruled the case could go forward, even if the claims involved foreign relations and potentially controversial issues.
Attorneys for the Order of Friars Minor and Vatican Bank appealed to the Supreme Court. They argued that resolution of Holocaust-era claims was an issue of foreign relations constitutionally committed to the political branches of the U.S. government, not the courts, Reuters said.
Attorneys for the Holocaust survivors said there were "no compelling reasons or extraordinary circumstances" warranting high court review of the case.
The Supreme Court rejected the appeals without any comment or recorded dissent, Reuters said.
The Israeli newspaper Ha'aretz published on Sunday an article about the lawsuit against the Vatican Bank. The newspaper's extensive article is based on last month's testimony by William Gowen at a federal court in San Francisco, which the paper says contains "historical and political explosives." The daily said that in 1999 a suit was filed at a court in San Francisco against the Vatican Bank, the Franciscan order, the National Bank of Switzerland and others.
Court testimony given by the former US intelligence agent links senior Vatican official Giovanni Battista Montini, who later became Pope Paul VI, to the laundering of property stolen from Jews and other victims in the Second World War and sheds light on his alleged role in hiding Croatian war criminals, including Ante Pavelic, the daily said. The testimony links Montini to "the theft of property of Jewish, Serb, Russian, Ukrainian and Roma victims during World War II in Yugoslavia," Ha'aretz says.
Montini, who served as the Vatican's deputy secretary of state during WWII, "was involved in the sheltering and smuggling of Croatian war criminals, such as the leader of the Ustashe movement, Ante Pavelic," as part of the extensive network known as the Rat Lines, the daily said.