The Court of Justice of the European Union (CJEU) said Poland had failed to show that allowing the agreement to continue to apply could cause serious and irreversible harm.
The country had not provided sufficient evidence that the deal would disrupt the EU's agricultural market, the court said, noting that farm prices depend on many factors, including energy and fertiliser costs, and competition from other countries.
Poland filed its legal challenge in May, arguing that the EU had breached its treaties, abused its powers and failed to properly consult member states when approving the deal.
It sought to have the agreement suspended while the case was heard, but the court said the country had not met the conditions for interim measures.
A final ruling is expected at a later date.
The EU-Mercosur agreement covers Argentina, Brazil, Paraguay and Uruguay.
It has applied provisionally since May, gradually removing tariffs and introducing preferential quotas for certain agricultural and industrial goods.
It followed nearly 25 years of negotiations between the EU and Mercosur.
The deal has triggered mass protests by European farmers, who fear competition from cheaper imports that do not meet EU standards.
EU member states agreed in January to bring the agreement into force, with Poland, France, Ireland, Hungary and Austria voting against and Belgium abstaining.
The agreement includes a safeguard clause allowing preferential terms to be suspended for sensitive goods such as poultry, beef and sugar if imports rise sharply.
(ał)
Source: PAP