Former residents of the Chagos Islands who were forcibly removed from their homeland more than 40 years ago have lost their latest legal challenge at the Supreme Court.

The islanders went to the Supreme Court a year ago to contest a 2008 decision by the House of Lords, which ruled that the exiles could not return to their native islands in the Indian Ocean.

Olivier Bancoult, the Chagossian leader who has been fighting in the courts on behalf of the exiles, argued that the three-to-two majority ruling in favour of the foreign secretary should be set aside, and insisted that the decision was "not the end of the road".

A panel of five justices was told that the Law Lords' majority relied heavily on a 2002 feasibility study into the resettlement of the islanders.

The study said life in the region would be precarious and the costs of long-term inhabitation of the outer islands would be prohibitive.

The islanders were forced to leave their homes in the 1960s and 1970s to make way for a US Air Force base on the largest island of the Chagos archipelago, Diego Garcia.

Diego Garcia, the largest island in the Chagos archipelago. Credit: Reuters

The last residents of the British colony were removed in May 1973.

The courts later ruled that the Chagossians could return to 65 of the islands, but not to Diego Garcia.

In 2004, the government used the royal prerogative to nullify the rulings, but this was overturned by the High Court and Court of Appeal.

The government then went to the House of Lords to argue that allowing the islanders to return would seriously affect defence and security.

The cause of the Chagos islanders has been backed by high-profile names such as Amal Clooney and Ben Fogle, who said that the treatment of the exiles made him "ashamed to be British".