Andre McKechnie sued the Department of Justice and Community Safety and Corrections after he was refused the salty, yeast-based condiment in prison.
McKechnie claimed the refusal denied him his human right to "enjoy his culture" as an Australian.
"Without being able to consume Vegemite, I feel deprived of being able to practice my Australian culture, sad and disconnected from my family and community," he told the Victorian Supreme Court.
Vegemite was banned in Victorian prisons in 2006 due to concerns it interfered with narcotic detection dogs, according to Corrections Victoria's list of contraband items.
Its yeast properties also gave it the potential to be used to brew alcohol.
Prison authorities and the commissioner did not accept there was a right under the Corrections Act or human rights charter to consume Vegemite while in prison.
The court on Monday dismissed McKechnie's case, finding no infringement of his right to be provided with "food that is adequate to maintain the health and wellbeing of the prisoner".
Vegemite might be regarded as part of an Australian culture and the human rights charter might extend to certain foods, Justice Claire Harris said.
But its prohibition in Victorian prisons was a proportionate measure by authorities, she said.
"It is demonstrably justified by the reasons identified by the (state), which are directly related to the discharge of prison authorities' statutory obligations, including those relating to the management, security and good order of the prison and the safe custody and welfare of the prisoners," she said.
"The specific refusal to permit Mr McKechnie to have access to Vegemite ... is reasonable and demonstrably justified."
McKechnie was found guilty and sentenced to life in prison for the stabbing murder of property developer Otto Kuhne in Queensland in 1996.
He was transferred to a Victorian prison ten years into his sentence from Queensland, which also has a ban on Vegemite.
South Australia and Tasmania also ban the iconic Australian yeast spread, but NSW sells it in its correctional centres.
Vegemite was first developed in Melbourne in 1923 as an alternative to the UK's Marmite.
It has become a breakfast staple for many Australians, despite its polarising taste.Â
Bega bought the brand from US-based Kraft in 2013.
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