Mr Steele compiled the dossier which contained unproven allegations about bribing officials and sex parties.
It was leaked to the media just before Mr Trump was sworn in as president.
In bringing the lawsuit against Orbis Business Intelligence Ltd, he said the dossier contained allegations that were inaccurate and breached his data protection rights.
In Thursday’s ruling in London, Mrs Justice Steyn DBE said she did not make any judgement on the allegations themselves but found Mr Trump’s claim had not been brought within the six-year limitation period.
“There are no compelling reasons to allow the claim to proceed to trial,” she wrote.
A statement is expected from Mr Steele later today.
The case stems from 2016, when a US political consultancy asked Mr Steele’s company to produce a report into potential Russian interference in that year’s US general election.
The project was paid for by Hillary Clinton’s Democrats and other political opponents of Mr Trump.
