The social media giant's semi-independent Oversight Board voted to uphold Mr Trump's ban after his account was suspended four months ago for inciting violence that led to the deadly January 6 US Capitol riot.
The board agreed with the company that that two of Mr Trump's posts on the platform on January 6 "severely violated" the content standards of both Facebook and Instagram.
"We love you. You’re very special," he said in the first post referring to the mob that had stormed the Capitol building.
In a second post he referred to the crowds as "great patriots" and said "remember this day forever".
Both comments violated Facebook’s rules against praising or supporting people engaged in violence, the board said.
While upholding the suspension, the board faulted Facebook for the way it made the decision.
The board said the ongoing risk of serious violence justified Facebook’s suspension at the time, but said it "was not appropriate for Facebook to impose an ‘indefinite’ suspension."
The board said Facebook was seeking to avoid its responsibilities by applying "a vague, standard-less penalty" and then referring the case to the board to resolve.
Facebook now has six months to reexamine the penalty and decide on further action that reflects the "gravity of the violation and the prospect of future harm."
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It comes as the former president launched his own communications channel via a blog in an attempt to return to social media without Facebook.
Users can "like" the Mr Trump's blog posts and share them to their own Facebook and Twitter pages, as well as sign up for notifications so they are alerted each time there is new content.
They can also make donations to the 45th president’s political action campaign.
A number of the posts already on the new feed, which appears to have been active since early April, make false claims and push debunked conspiracy theories about Mr Trump’s defeat to Joe Biden in the presidential election last year.
Other posts attack political opponents and the social media platforms themselves in a similar fashion to how the former president’s Twitter account operated before it was suspended.
Since leaving office, there had been reports that Mr Trump would look to create and launch his own social media platform as a way to get around his ongoing bans, as well as directly reaching out to his supporters.
In Wednesday's ruling, the board says if Facebook decides to restore Trump’s accounts, the company must be able to promptly address further violations.
A Trump spokesman did not immediately respond to a request for comment.
Trump has also been permanently banned from Twitter.