Zipporah Lisle-Mainwaring, 71, had asked a High Court judge to challenge planning policy which blocked her plans to build a two-storey basement.
However, the judge said the Kensington and Chelsea council's decision was reasonable and dismissed the case.
She was accused of painting the house to "get her own back" on neighbours who objected to her property plans.
Ms Lisle-Mainwaring had wanted to demolish her Kensington property and replace it with a new dwelling and two-storey basement.
At the High Court she joined forces with the construction company Force Foundations to challenge the council's policy of restricting basements to one storey.
Paul Brown QC told Mrs Justice Lang earlier this month the policy was "fundamentally flawed".
He added the decision to adopt it in January was taken without due regard to relevant planning issues and without consideration being given to whether there was "a reasonable alternative".
The policy was introduced because of concern over the increasing number of applications for "subterranean developments" in the area.
Councillor Timothy Coleridge, from Kensington and Chelsea council, said: "Our policy brings some much-needed sanity to the mega-basement mania and finds the proper balance between subterranean development and the right of the rest of the community to the peaceful enjoyment of their homes. "
Ms Lisle-Mainwaring hit the headlines in April after painting her house in red and white stripes.
Residents called the design "hideous and tacky", but Ms Lisle-Mainwaring said they were being "hysterical" and denied the paint-job had been done to spite her neighbours.
A property developer who painted red and white stripes on her townhouse has lost her latest planning battle.