Justice Patrick Hodge said five judges at the court had ruled unanimously that "the terms 'woman' and 'sex' in the Equality Act refer to a biological woman and biological sex".
The ruling means a transgender person with a certificate that recognises them as female should not be considered a woman for equality purposes.
But the court added its ruling "does not remove protection from trans people", who are "protected from discrimination on the ground of gender reassignment".
The case stems from a 2018 law passed by the Scottish Parliament stating there should be a 50 per cent female representation on the boards of Scottish public bodies.
Transgender women were to be included in meeting the quota.
Feminist groups that had challenged the Scottish government hailed Wednesday's ruling as a major victory.
"The court has given us the right answer: the protected characteristic of sex - male and female - refers to reality, not to paperwork," said Maya Forstater of the group Sex Matters.
For Women Scotland (FWS), the women's rights group that brought the legal challenge, argued the Scottish officials' redefinition of woman went beyond parliament's powers.
But Scottish officials then issued new guidance stating the definition of woman included someone with a gender recognition certificate.
FWS successfully sought to overturn that.
The group had said the outcome of the case could have consequences in Scotland, England and Wales for sex-based rights as well as single-sex facilities such as toilets, hospital wards and prisons.
"Not tying the definition of sex to its ordinary meaning means that public boards could conceivably comprise of 50 per cent men, and 50 per cent men with certificates, yet still lawfully meet the targets for female representation," group director Trina Budge said previously.
The challenge was rejected by a court in 2022, but the group was granted permission in 2024 to take its case to the Supreme Court.
Aidan O'Neill, a lawyer for FWS, told the Supreme Court judges - three men and two women - that under the Equality Act "sex" should refer to biological sex and as understood "in ordinary, everyday language".
"Our position is your sex, whether you are a man or a woman or a girl or a boy is determined from conception in utero, even before one's birth, by one's body," he said.
"It is an expression of one's bodily reality. It is an immutable biological state."
The women's right group counted among its supporters author JK Rowling, who reportedly donated tens of thousands of pounds to back its work.
The Harry Potter writer has been vocal in arguing that the rights for trans women should not come at the expense of those who are born biologically female.
Opponents, including Amnesty International, said excluding transgender people from sex discrimination protections conflicted with human rights laws.
Amnesty submitted a brief in court saying it was concerned about the deterioration of the rights for trans people in the UK and abroad.
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