The Federal Court upheld a judgement made last November.
There were no obvious grounds to show that the previous judgement was erroneous, according to the Federal Court's latest ruling quoted by the media.
Captain Dragan is an Australian citizen who was arrested in Australia in January 2006 on a warrant issued by Croatia for his extradition.
Since then, this leader of former Serb paramilitary forces in Croatia has been trying by all legal means to deter his transfer to Croatia where he is charged with war crimes against civilians and prisoners of war.
Captain Dragan can appeal the latest ruling within 28 days.