The law "prohibits the TLC from refusing to grant licenses to persons with disabilities who are otherwise qualified to own or operate a taxi," the justices wrote. "It does not assist persons who are consumers of the licensees' product."
The decision was a blow to disability advocates, who had heralded the lower court ruling that declared access to such services "a basic civil right."
"We're disappointed. But this is Round One of what is likely to be a lengthy battle on many fronts," said Sid Wolinsky, director of litigation for Disability Rights Advocates, which represented some of the plaintiffs.
Wolinsky argued his group could still ultimately win the lawsuit through other arguments that weren't addressed in the appeals court ruling. But the city's disabled residents will suffer in the interim, he said.
"What's going to happen now is probably going to take many, many months and even years to decide," he said. "While that happens the New York City taxi fleet is 98.2 percent inaccessible, and that's not going to change any time in the near future."
Michelle Goldberg-Cahn, a lawyer for the city, said she believes the lower court would also find in favor of the city. "We think that the remaining claims similarly lack merit," she said.
Mayor Michael Bloomberg applauded the court decision.
"This ruling is consistent with common sense and the practical needs of both the taxi industry and the disabled, and we will continue our efforts to assist disabled riders," he said in a statement.