Kamariah Ali, 60, says she should not be tried under Islamic law because she is no longer a Muslim.
But judges ruled that only Malaysia’s Islamic courts could decide on the case because Ms Kamariah was born a Muslim.
Malaysia’s Islamic courts have authority over only Muslims – the rest of the population are not bound by their rules.
The BBC’s Jennifer Pak in Kuala Lumpur says Ms Kamariah’s case is one of a growing number of legal challenges brought by those caught between the Islamic authorities and the civil courts.
Ms Kamariah had asked the civil courts to declare her freedom to worship, as guaranteed by the constitution.
But the judging panel said she had to go through the Islamic courts system in order to renounce her faith – something that is rarely granted, our correspondent says.
Malaysia’s Islamic authorities consider the Sky Kingdom sect to be heretical.
In 2001, Sky Kingdom founder Ayah Pin was jailed for 11 months and was made to pay a fine for “humilating Islamic teaching.” Earlier the Government said the teachings of Ayah Pin were dangerous to the Muslim community since the group’s members declared themselves as apostates.
The Qur’an itself does not prescribe any earthly punishment for apostasy; Islamic scholarship differs on its punishment, ranging from execution – on an interpretation of certain hadiths — to no punishment at all as long as they “do not work against the Muslim society or nation.”
According to Islamic law apostasy is identified by a list of actions such as conversion to another religion, denying the existence of God, rejecting the prophets, mocking God or the prophets, idol worship, rejecting the sharia, or permitting behavior that is forbidden by the sharia, such as adultery.
In May, 2005, Malaysia’s government ordered Pin and his followers to demolish the structures found at their commune, claiming that the buildings violated the conditions on the use of the land.
Ayah Pin disappeard during the raid on his commune, and is believed to be living in Thailand.
A Muslim by birth, Ariffin Mohamed, also known as Ayah Pin (Ayah is a common honorific meaning “father”), claims to have direct contact with the heavens and is believed by his followers to be the reincarnation of Jesus, Buddha, Shiva, and Muhammad. Devotees of Sky Kingdom believe that one day, Ayah Pin will return as the Imam Mahdi. His followers consider him the king of the sky, and the supreme object of devotion for all religions.