Migrants have a duty to conform to local values in the society they choose to move to, the court said, even if those values are different from in their home country.
The kirpan, a small knife or sword, is one of five religious articles many Sikhs carry with them at all times.
But the legality of carrying the curved knife in public has been debated in several countries where Sikhs are a minority.
Denmark became the world's first country to explicitly ban them in 2006, while bans in Belgium and the United Kingdom have been overturned due to the knife's status as a religious symbol.
The Italian judges on Monday rejected the appeal of a Sikh who had been fined €2,000 in 2015 for carrying an 18cm-long kirpan in Goito, a town in Lombardy. He argued that the ban was unfair as the kirpan was a religious symbol rather than a weapon, but the court upheld the original sentence.
"Attachment to values which violate the laws of the host country is intolerable, even if they are lawful in the country of origin," the court said, adding that "public safety is an asset to be protected".
"Multi-ethnic society is a necessity, but co-existence among different people requires the identification of a common nucleus, which immigrants and host societies must recognize."
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File photo: Karlheinz Schindler/AFP