The Dalai Lama was invited to deliver a lecture at the 80th birthday celebrations of anti-apartheid activist Desmond Tutu on October 4 last year but his application for a visa did not get any response from authorities on time.
The delay led him to cancel his trip while an outraged Tutu had lashed out at the government calling it worse than the apartheid-era dispensation.
The Supreme Court of Appeal in Bloemfontein today ruled that government had "deliberately delayed" granting the spiritual leader a visa, according to a report in Bua news.
The appeal was brought in by opposition lawmakers after the episode created much controversy and accusations that the South African government was trying to appease China.
Earlier, a High Court had dismissed a plea on whether it had been constitutional for the government not to grant a visa to the Dalai Lama.
An immigration official was quoted as saying that the department of Home Affairs had taken note of the court ruling but will study the judgement and its reasoning in detail before responding comprehensively to it.