Schapelle Corby's conviction last May on charges of smuggling 4.2 kilograms (about nine pounds) of marijuana onto Bali has triggered angry protests and intense media interest in Australia, where many people say they believe she is innocent.
On Thursday, Indonesia's Supreme Court announced it had rejected an earlier appeal and reinstated her 20-year sentence, which was cut to 15 years as the result of her first petition.
Corby now intends to launch a final appeal, known as a judicial review, to the Supreme Court to have the sentence overturned, said her lawyer Erwin Siregar. He said he had new evidence to present to judges, but gave no more details.
"Schapelle does not accept the verdict and will pursue all legal means to fight this to the end," Siregar told The Associated Press.
The marijuana was found by airport officials in her surfboard bag.
Corby's defense team claims she was probably a victim of a domestic drug ring involving corrupt Australian baggage handlers who allegedly failed to retrieve the planted marijuana before her bags were transferred to an international flight.
They have presented no evidence to back up this theory.
Marijuana - especially the high-grade variety that Corby was allegedly carrying - fetches a high price among foreign tourists and residents on Bali.
Dozens of foreigners are imprisoned for drug smuggling every year in Indonesia, most of them African or Asians. Their cases rarely make the news.