The firm had attempted to move the case, which started in 2012, to California. But judge Justice Tugendhat at the High Court in London said that the UK courts had "appropriate jurisdiction" to conduct the case.
The case – which has already cost Google nearly $40m after settlements with 38 US states and the US Federal Trade Commission – focuses on whether it deliberately bypassed privacy settings available in Apple's Safari browser by using cookies to present targeted advertisements.
Google insists the tracking was accidental, and following the settlements in 2012 promised it would make technical changes to ensure its cookie technology recognised browser privacy settings.
Nonetheless, the claimants are looking for further justice in the UK, and previously blasted Google as "arrogant" for attempting to block the case.
A Google spokesman said in December that the company was merely looking for clarification on whether the case should be held in the UK. "A case almost identical to this one was dismissed in its entirety two months ago in the US. We're asking the court to re-examine whether this case meets the standards required in the UK for a case like this to go to trial," he said.
Olswang lawyer Dan Tench, who is handling the case, welcomed the news. "It is only right that English claimants should have a case heard in England, and not have to travel to California because it suits Google better. Google has unlimited resources to deal with legal matters. Ordinary Britons do not," he said.
"This was a flagrant, if ultimately unsuccessful, attempt to evade justice. The court saw through it. We now look forward to the discovery process where we expect to find out what really happened at Google to cause it to breach privacy laws."
Claimant Judith Vidal-Hall said: "We want to know how long they have done this for, what they've done with our private data, how much they have made from this, and why they keep flouting privacy laws."
The Press Association reports that Google intends to take the case to the Court of Appeal.