Kuwait's ministries of commerce and information in January revoked the paper's commercial and media licences, saying it had violated minimum capital requirements.
A lower court had ruled that the government measures were legal, and the appeals court upheld the verdict.
Under Kuwaiti law, the commercial licences of companies with losses worth more than 75 percent of their capital are cancelled.
Al-Watan, which was one of the largest dailies in Kuwait, was owned by former oil minister Sheikh Ali Khalifa al-Sabah, a member of the ruling family, and managed by his son Sheikh Khalifa.
Kuwaiti authorities closed the newspaper's satellite television channel in June for the same reasons.