He has been held in a maximum-security jail in Gaziantep, in southern Turkey, since his capture.
The former rapper from Melbourne had featured in IS videos, has been linked to several attack plans in Australia and has urged lone wolf attacks against the United States.
Prakash, also known as Abu Khaled al-Cambodi has been linked to a failed Melbourne plot to behead a police officer and another attack that saw two officers stabbed outside a Melbourne police station.
The self-confessed IS member, also known by the alias Abu Khaled al-Cambodi, was described by former attorney-general George Brandis as the "the principal Australian reaching back from the Middle East into Australia".
Foreign Affairs Minister Julie Bishop has expressed disappointment at the Turkish court's decision.
"We will continue to engage with Turkish authorities as they consider whether to appeal the extradition decision," she said in a statement on Friday.
Prakash is the subject of an Australian Federal Police arrest warrant for "membership of a terrorist organisation", "advocating terrorism", "providing support to a terrorist organisation" and "incursions into foreign countries with the intention of engaging in hostile activities".
He has previously admitted being a member of Islamic State but said he had nothing to do with the group in Australia.
He faces a potential life sentence if convicted in Australia of terrorism offences.
