Malaysia's highest court has dismissed a bid by Christians for the right to use the word "Allah", ending a long legal battle that has caused religious tensions in the Muslim-majority country.

The Catholic Church had been seeking to reverse a government ban on it referring to God by the Arabic word "Allah" in the local Malay-language edition of its Herald newspaper.

But a seven-judge panel in the administrative capital Putrajaya ruled a lower court decision siding with the government stood.

"It (the Court of Appeal) applied the correct test, and it is not open for us to interfere," chief justice Arifin Zakaria said on Monday. "Hence, the application is dismissed."

S Selvarajah, one of the church's lawyers, said the decision meant the end of the court case.

"It's a blanket ban. Non-Muslims cannot use the word," he told the AFP news agency.

Outside the court, which was cordoned off, about a hundred Muslim activists shouted "Allahu Akbar" or "God is great", and held banners that read, "Uniting to defend the name of Allah" ahead of the verdict.

The dispute first erupted in 2007 when the Home Ministry threatened to revoke the publishing permit of the Herald for using the Arabic word in its Malay-language edition.

The church launched a court case to challenge the directive, arguing "Allah" had been used for centuries in Malay language Bibles and other literature to refer to "God" outside of Islam.

But authorities say using "Allah" in non-Muslim literature could confuse Muslims and entice them to convert, a crime in Malaysia.

An appeals court last October reinstated the ban, overturning a lower court's 2009 ruling in favour of the church that had led to a spate of attacks on houses of worship.