Cardinal George Pell, the most senior Catholic to be found guilty of child sex abuse, has lost his appeal against the offences.
Pope Francis' former finance minister was sentenced to six years in prison in March, after being found guilty of molesting two 13-year-old choirboys in Melbourne's St Patrick's Cathedral in the 1990s last December.
The Victoria state Court of Appeal rejected Pell's appeal by 2-1 on Wednesday.
Pell, 78, had just become archbishop of Australia's second largest city and had set up a world-first compensation arrangement for victims of clergy sexual abuse at the time of the offences.
The former Vatican finance minister will now consider an appeal to the High Court - Australia's highest court - and maintains his innocence.
His spokeswoman Katrina Lee said in a statement: "Cardinal Pell is obviously disappointed with the decision today."
The Vatican is conducting its own investigation into sex abuse allegations against Pell, but noted Pell had a right to appeal and added it respected the Australian judicial system.
A statement said: "The Holy See confirms its closeness to the victims of sexual abuse and its commitment to pursue, through the competent ecclesiastical authorities, those members of the clergy who commit such abuse."
Prime Minister Scott Morrison said soon after the appeal was rejected that Pell would be stripped of his Order of Australia honour.
Pell showed no emotion as the verdict was read out to a packed courtroom, but bowed his head moments later.
He had arrived at the court in a prison van and was handcuffed as he was led away by a guard.
The Australian Catholic Bishops’ Conference, a body representing all the nation’s Catholic bishops, said all Australians must be equal under the law and they accept the court’s verdict.
“I respectfully receive the court’s decision and I encourage everyone to do the same,” Melbourne Archbishop Peter Comensoli said in a statement.
Chief Justice Anne Ferguson said she and President of the Court of Appeal Chris Maxwell “decided that it was open to the jury to be satisfied beyond reasonable doubt that Cardinal Pell was guilty”.
Pell must serve a minimum of three years and eight months of his six-year sentence before he will be eligible for parole.
A non-profit group that seeks accountability for sex abuse in the Catholic church said the ruling was a watershed that should give all victims hope.
"Catholics everywhere owe thanks to the incredibly brave victim who brought Pell to justice," the U.S.-based group said in a statement.
One of the choirboys, identified by the sentencing judge as J.J., was the key prosecution witness.
His friend, identified as M.R., died of a heroin overdose in 2014 at the age of 31 without ever complaining he had been abused. Neither victim can be named.
J.J. said he felt a responsibility to come forward after attending his friend's funeral.
"The criminal process has been stressful. The journey has taken me to places that, in my darkest moments, I feared I could not return from," he said in a statement released by his lawyer.
"I am grateful for a legal system that everyone can believe in, where everybody is equal before the law and no one is above the law," he added.
The victim said he was relieved by the verdict and, "I just hope that it's all over now."