Blaine Adamson, the owner of Hands On Originals disagreed with the message Gay and Lesbian Services Organization (GLSO) wanted him to print on shirts to promote their 2012 Lexington Pride Festival.
In a two to one decision, a panel of appeals judges affirmed an earlier decision by Judge James Ishmael, who reversed the Lexington Human Rights Commission's 2014 decision that the company violated the city's fairness ordinance.
In a video posted on the American Christian non-profit organisation Alliance Defending Freedom, Adamson claims his offer to connect the GLSO to another printer who would create the shirts for the same price that he would have charged was refused.
"There came a point I was so broken. I went home, just laid in bed - lights out and began to cry out to the Lord and just say 'God I will stand, no matter what the cost will be'.
"Because we're the ones at the end of the day that have to print that on a shirt and it speaks a message the second it goes off to press.
I'm accountable to that first to God of what I put on a shirt to promote. But we did wrestle with the reality in this that we may lose our business."
Lexington's fairness ordinance prohibits businesses which are open to the public from discriminating against people based on sexual orientation.
Adamson insists he will: "work with any person, no matter who they are, no matter what their belief systems are.
"But when they present a message that conflicts with my convictions - it's not something that I can print. That's the line for me."
The Court of Appeals ruled that speech is not necessarily protected under the fairness ordinance.
Chief Judge Joy Kramer wrote in her opinion: "The right of free speech does not guarantee to any person the right to use someone else's property.
"Nothing in the fairness ordinance prohibits Hands On Originals, a private business, from engaging in viewpoint or message censorship."
The board of the Human Rights Commission will decide whether to ask the Kentucky Supreme Court to hear the case after reviewing the opinion, Ray Sexton, the agency's executive director, told the Lexington Herald-Leader.
Sexton said: "Certainly when cases are decided like this, they may set a precedent for future cases.
"Hopefully that won't happen here. But we'll have to take a look at this and see how we're going to handle it."