A legal bid by angry residents to halt the controversial sky rail project has been dismissed in the Supreme Court.

Labor is building kilometres of elevated rail track along the Cranbourne Pakenham line between Caulfield and Dandenong station as part of its policy to remove 50 level crossings.

An artist's impression of skyrail.

The decision to elevate the track, rather than put the rail under roads, has infuriated some residents.

The Lower Our Tracks Inc group had taken action in the Supreme Court, challenging as unreasonable Planning Minister Richard Wynne's decision to use powers of discretion during the notification of planning changes.