In a 5-4 decision, the 6th U.S. Circuit Court of Appeals said the law school's use of race was justified, reversing a decision by a lower court that barred the school's policy as unconstitutional discrimination.
"We reject the district court's conclusion and find that the law school has a compelling interest in achieving a diverse student body," the majority opinion said.
In December, the 6th U.S. Circuit Court of Appeals heard two hours of arguments from lawyers in two consolidated lawsuits that contend Michigan's law school and undergraduate admissions policies discriminate against whites in favor of less-qualified minorities.
The nine appeals court judges - seven whites and two blacks - took both cases under review. A three-judge panel of the court was to have heard the disputes Oct. 23, but agreed to bypass that usual first step for the issue to quickly go before the full court.
The court said in its filing Tuesday that a separate decision would come down later in the undergraduate case.
The university contended it must consider the race of its applicants to create a diverse student body and provide a more rounded education.
Michigan has also said race was one factor among several in its policies, that it did not reserve a certain number of slots for minority applicants and that if race was not a factor, the number of minority students would plunge.
But opponents of the university's use of affirmative-action policies said they can amount to illegal discrimination against white applicants who may in some cases have better academic qualifications.
The lawsuits were filed by three white students who had been denied admission, and backed by the Center for Individual Rights, an advocacy group that challenges affirmative action. They contended the university's policies illegally discriminated against white students.
A University of Michigan official declined to comment immediately, saying he had not yet reviewed the ruling. A message seeking comment was left with an attorney with the Center for Individual Rights, which argued the case for the plaintiff.
The Supreme Court hasn't ruled definitively on affirmative action in higher education since the 1978 Bakke decision, when the majority said universities may take race into account in admissions.
In March 2001, U.S. District Judge Bernard Friedman struck down the law school's admissions policy, saying the criteria were not clearly defined and relied too heavily on race.
The law school relies on grades and exam scores but considers applicants who, despite low scores, "may help achieve that diversity which has the potential to enrich everyone's education."
To Friedman, diversity was not a good enough reason to factor race into admissions.
"Whatever solution the law school elects to pursue," Friedman said, "it must be race neutral. The focus must be upon the merit of individual applicants, not upon characteristics of racial groups."