Germany's Constitutional Court said it had thrown out an appeal by the 89-year-old's lawyers on grounds of his ailing health and because he had already spent time in Israeli jails.
In what is likely to be one of the last major Nazi war-crimes trials in Germany, Ukrainian-born Demjanjuk, is now due to stand trial in Munich.
Prosecutors have charged Demjanjuk with being a guard at the Sobibor death camp in Nazi-occupied Poland in 1943 where hundreds of thousands of Jews were herded to the gas chambers.
Demjanjuk's family insists he is innocent and that he is too ill to stand trial. He was deported from the United States in May.
He was sentenced to death by an Israeli court two decades ago after he was convicted of being the feared death camp guard "Ivan the Terrible" who would hack at naked prisoners with a sword and inflict cruel and sadistic punishments on them.
That ruling was overturned in 1993 when statements from other guards identified another man as the Ivan.
But Demjanjuk is still number three on the Simon Wiesenthal Centre's list of most wanted war criminals behind two others believed to be dead.