Formula One's ruling body the FIA ruled on Wednesday that the diffuser fitted to championship leader Jenson Button's Brawn GP is legal.
The long-awaited verdict confirms the Briton at the top of the driver standings after sensational wins in the season's first two races in Australia and Malaysia.
The ruling came after a five judge FIA Court of Appeal panel sat on Tuesday to hear complaints that the diffuser on the Brawn, Toyota and Williams cars contravened the sport's new technical regulations.
The appeal against the aerodynamic device fitted to the back of the three teams' cars was led by Ferrari, Red Bull and Renault.
Wednesday's verdict confirmed an original ruling given by race stewards in Australia that the diffusers were legal.
A statement issued by the FIA on Wednesday confirmed: "Based on the arguments heard and evidence before it, the Court has concluded that the (Australian) stewards were correct to find that the cars in question comply with the applicable regulations."
All three teams are now free to compete in Sunday's third-leg of the season in China with Brawn leading the constructor's title race on 25 points from Toyota in second on 16.
In the driver's standings Button leads on 15 points from his teammate Rubens Barrichello on 10 with Toyota's Jarno Trulli on 8.5points in third.
The FIA decision will have come as a major relief to Ross Brawn, the man behind Brawn GP, and Button, who were in danger of being stripped of their points won in Melbourne and Sepang if the appeal had been upheld.
During Tuesday's heated session at the FIA's headquarters at Place de la Concorde in the centre of Paris Brawn was described as "a person of supreme arrogance" by Ferrari's legal representative, Nigel Tozzi QC.
The Briton countered, telling the court that his team's diffuser was merely "an innovative approach of an existing idea".
Wednesday's verdict is the last chapter of a row that erupted on the eve of the season-opening race in Australia when Ferrari, Red Bull and Renault protested against the legality of the split-level diffusers.
After the Melbourne race stewards had rejected their appeal BMW Sauber launched another similar protest before Sepang, which again was rejected.
The FIA ruling means that the seven teams whose cars do not feature the diffusers which enhance downthrust and consequently improve a car's handling will probably try to incorporate them in their designs.
"I've heard several of them complaining about the cost," Brawn told the BBC before Tuesday's hearing.
"But there are lots of things teams copy from each other and the cost doesn't get debated.
"I think some teams will be able to do it very quickly, but for other teams it will be more difficult because of their suspension configuration or other elements of the car."