The Indianapolis Star reported that the three-year-old case in Marion Circuit Court was dropped last week.
The First Church of Cannabis filed the lawsuit on grounds that pot was considered a sacrament under Indiana's Religious Freedom Restoration Act.
In her dismissal, Judge Sheryl Lynch said the church's love for marijuana does not count as practicing a religion. She also said allowing exemptions for illegal marijuana use and possession would negatively impact society.
The pro-cannabis church's attorney told The Star last week he plans to appeal should the church lose the case. The group has argued that the government has no right to decide which religious beliefs should be protected.