The council wants to replace the hospital with a 420-pupil school, funded by luxury flats, to deal with the ongoing school place crisis.
The Friends of Putney Common (FofPC) took legal action over an agreement between the council and the Wimbledon and Putney Commons Conservators for an access road to the new school.
They fear the construction of an access way, roundabout, bollards and barrier would diminish and suburbanise the common.
But the council argues that little more than half of the land would be used by the school and flats, the rest would be grassed over, and much of the proposed road would be built on top of an existing road.
Last year the High Court rejected campaigners’ arguments in favour of the conservators and Wandsworth Council. This week, three of the country’s most senior judges have rejected their argument in the Court of Appeal.
FofPC are now considering further action, including an appeal to the Supreme Court. They say more than 1,200 people objected the original planning proposal with many local residents contributing to their legal costs – raising more than £15,000.
Nick Evans of FofPC said: “We are very grateful to the many residents who have supported the campaign over the last two years, hundreds of whom contributed generously to our legal costs. We will now consider an appeal to the Supreme Court.
“FofPC will continue to fight to keep Putney Common from being further degraded.”
Councillor Kathy Tracey, education spokesperson, said: “Our proposals do not involve laying tarmac or concrete over large parts of the common. In fact they will actually lead to the green open space of the common being increased not reduced.
“I hope this unanimous Court of Appeal decision now means that we can get on with the important job of providing sufficient numbers of school places for children in Putney.”
The derelict hospital closed to patients in 1999 and was acquired by the council in 2012.