The seven-member panel said opposition leader Kizza Besigye's Forum for Democratic Change (FDC) had failed to prove the polls were tainted by fraud, even as they acknowledged irregularities.
These anomalies, however, did not rise to the level of requiring a re-run of the election in which President Museveni trounced his rival and the ruling National Resistance Movement (NRM) won back control of parliament, it said in its ruling.
"We find that there was non-compliance with the principles laid down under the constitution and the electoral law," Chief Justice Benjamin Odoki said.
"But by a majority decision of four to three we find that it was not proved to the satisfaction of the court that the failure to comply with the provisions of the law affected the results in a substantial manner," he said.
"We find that no illegal practices or any other offense was proved to the satisfaction of the court to have been committed by (Museveni) personally or by his agents with his knowledge or consent or approval," Chief Justice Odoki.
"It is hereby ordered that the petition be dismissed," he said.
Grave concerns
But the Chief Justice added that the justices had grave concerns about improprieties raised by the opposition challenge.
Those included harassment and intimidation of the opposition by the country's security forces, "massive disenfranchisement" of voters," apparent bias on the part of some electoral officials, and inadequate voter education, the ruling said.
Chief Justice Odoki said those matters "should be urgently addressed" by the relevant authorities.
The ruling National Resistance Movement (NRM) said the election was "free, fair and democratic."
But government lawyers representing Uganda's national election board -- while admitting to minor counting mistakes -- urged the court to dismiss the challenge with prejudice, arguing that Mr Besigye had not proved his case.
In the court room challenge, Mr Besigye's lawyers contended their client was robbed of more than one million votes during the counting which -- when combined with intimidation of the opposition during the campaign and ballot fraud on polling day – illegally gave the NRM a victory.
President Museveni is due to be sworn in for a new term in office on May 12.
Mr Besigye, is currently on trial for treason.