The Oregon Court of Appeals said Aaron and Melissa Klein had violated Oregon law by not baking the cake in 2012 for Rachel and Laurel Bowman-Cryer and upheld the couple's previous $135,000 fine.
However, the couple took the case to the highest court and justices dismissed the state court ruling against the owners of Sweet Cakes.
State judges have now been told to look at the case again in light of last year's Supreme Court ruling in favour of Christian Colorado baker Jack Phillips who also refused to make a cake for a same-sex wedding.
The court ruled that the Colorado Civil Rights Commission showed anti-religious bias against Phillips.
The Oregon appellate court ruling was delivered before the Supreme Court's decision in Phillips' (below) case.
Kelley Shackelford, president, CEO, and chief counsel of First Liberty Institute - the law group which represented the Kleins - called Monday's Supreme Court decision "a victory for the religious liberty of all Americans."
Shackelford said: "This is a victory for Aaron and Melissa Klein and for religious liberty for all Americans.
"The Constitution protects speech, popular or not, from condemnation by the government. The message from the Court is clear - government hostility toward religious Americans will not be tolerated."
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