Ninth U.S. Circuit Court of Appeals Judge A. Wallace Tashima, sitting by designation for the District of Idaho, made the ruling on Tuesday.
Sheep ranchers in Idaho and other states in 2012 sued the Forest Service over the bighorn sheep protection plan announced in 2010.
The groups contended the Forest Service didn't adequately consider the environmental consequences of the plan as required by the National Environmental Protection Act.
But Tashima ruled in the 22-page decision that the agency did meet requirements in creating the plan.