Imdad Ali was declared clinically insane after killing a cleric in 2002.
Safia Bano, Mr Ali's wife, had appealed against her husband's conviction on the grounds that he was insane.
But the court rejected the appeal on Friday, saying schizophrenia was "not a permanent mental disorder".
A copy of the court verdict, obtained by the local Express Tribune said: "The prognosis has been improved with drugs, by vigorous psychological and social managements, and rehabilitation.
"It [schizophrenia] is, therefore, a recoverable disease, which in all the cases, does not fall with the definition of 'mental disorder'."
Mr Ali's lawyers say he does not understand crime or punishment, and his doctors say he is delusional, hears voices in his head, and suffers from a persecution complex.
The United Nations says it would be a violation of international law to execute Imdad Ali.
The American Psychological Association defines schizophrenia as "a serious mental illness characterised by incoherent or illogical thoughts, bizarre behaviour and speech, and delusions or hallucinations, such as hearing voices".
In 2015, Pakistan ended a a seven-year death penalty suspension.
The ruling means Mr Ali could be hanged as early as next week.
The Supreme Court in Pakistan has ruled that schizophrenia is not a mental illness, paving the way for the execution of a paranoid schizophrenic man convicted of murder.