The Court of Arbitration for Sport ruled that the regulations are discriminatory, but concluded such discrimination is a "necessary, reasonable and proportionate means" of preserving the integrity of female athletics.
The Olympian was challenging a proposal by athletics' governing body to limit testosterone levels in female athletes competing in distances of between 400m and one mile.
She has since tweeted this morning, posting a picture with the words "sometimes it's better to react with no reaction".
She is considering an appeal with her lawyers, according to Reuters.
'I will once again rise above and continue to inspire young women'
The two-time Olympic champion said in a statement released by her lawyers: "I know that the IAAF’s (International Association of Athletics Federations) regulations have always targeted me specifically.
“For a decade the IAAF has tried to slow me down, but this has actually made me stronger.
"The decision of the CAS (Court of Arbitration for Sport) will not hold me back. I will once again rise above and continue to inspire young women and athletes in South Africa and around the world.”
Dr Alun Williams, the director of the sport genomics laboratory at Manchester Metropolitan University, gave evidence in defence of Semenya and told ITV news he "would not rule out" the athlete's chances of appealing to the European Court of Human Rights.
He added the IAAF failed to produce a "high level of scientific evidence" to support the change in regulations and believes the whole basis is "weak".
Matthieu Reeb, Secretary General of Court of Arbitration for Sport, told reporters the panel found regulations are discriminatory but "necessary".
He said: "The panel found that the DSD (differences in sexual development) regulations are discriminatory, but the majority of the panel found that on the basis of the evidence submitted by the parties in the procedure, such discrimination is a necessary, reasonable and proportionate means of achieving the IAAF's objective of preserving the integrity of female athletics in some track events of international competitions, that is from 400 metres to one mile."
The IAAF released a statement welcoming the ruling.
“The IAAF... is pleased that the regulations were found to be a necessary, reasonable and proportionate means of achieving the IAAF’s legitimate aim of preserving the integrity of female athletics in the restricted events,” the global governing body stated.
“No athlete will be forced to undergo any assessment and/or treatment under these regulations.
"It is each athlete’s responsibility, in close consultation with her medical team, to decide whether or not to proceed with any assessment and/or treatment.”
'She's just able to produce certain performances that we could never contend with'
British runner Marilyn Okoro, who has lost out to Semenya in past races, told ITV News many runners simply can't match her performances.
She said: "Her presence in the sport has massive connotations for the legacy it's leaving behind and also it's the mentality that we go into training and races just thinking there's very little we can do to actually beat her.
"It's out of our control, it doesn't matter how hard we train day in, day out - she's just able to produce certain performances that we could never contend with."
She added she has the "utmost respect" for Semenya as an athlete and Olympic champion.
Paula Radcliffe said she "respects" the court for taking a "difficult decision" but said she won't be commenting publicly out of respect for Semenya and other people affected.
But she added: "I am just glad and relieved that a level playing field was preserved and that the future of female sport is protected."
How does Semenya's different hormone level affect the sport?
Semenya has a condition called hyperandrogenism which means her testosterone levels are naturally elevated.
Testosterone is a hormone that strengthens muscle tone and bone mass. Because of that, it is against the rules for athletes to inject or swallow testosterone supplements.
The average testosterone levels for women are between 0.52 and 2.43 nmol/L (nanomoles per litre of blood), while for men it is between 10.41 to 34.70.
After winning the 800m at the World Championships in 2009 at the age of 18, Semenya was forced to spend 11 months on the sidelines while she underwent sex verification testing.
The results of the tests were never made public, but the 28-year-old was cleared to compete again in women's events in 2010.
Unconfirmed reports suggest that Semenya may have up to three times the testosterone levels of the average woman.
Now, the International Association of Athletics Federation (IAAF) plans to reduce the testosterone limit level from 10 nanomoles per litre to five for female athletes.
The International Olympic Committee is planning to do the same.
What does this mean for Semenya?
The IAAF's proposals would require women with elevated testosterone levels to either take medication to reduce their levels, or run against men if they wish to continue competing.
Semenya currently holds the South African record of 1.54.25 for the 800m, not far off the world record of 1.53.28, set in 1983 by Jarmila Kratochvílova of Czechslovakia.
Estimates suggest that if she were to take medication to suppress her testosterone levels, she could end up running between five and seven seconds slower over 800m.
What next for Semenya?
Caster Semenya and her lawyers are considering appealing the ruling.
A further appeal is possible to Switzerland's Supreme Court in Lausanne, but judges rarely overturn decisions of the world sports court.
Semenya has said she does not wish to undergo medical intervention to change who she is and how she was born, and wants to compete naturally.
On Friday, Semenya won her 5,000m race comfortably at the South African Championships.
This distance is outside the scope of the IAAF ruling and represents a new race for the runner, one in which she may consider taking part more in future.
Semenya looked in complete control as she won in a time of 16:05.97 on the opening day of the championships.
But if she wants to defend her Olympic 800m title, she will have to take hormone medication under these regulations.