The cleric, 58, who has been living in Norway since 1991, founded the radical Muslim group Ansar al-Islam.
He was released from prison at the end of January after serving a two-year, 10-month sentence for making threats against Prime Minister Erna Solberg, before she came to office, and three Kurds.
The police had invoked special measures to order Krekar, whose real name is Najmeddine Faraj Ahmad, to live in a refugee centre in Kyrksaeteroera, a village of 2,500 people situated 500 kilometres (300 miles) from the capital.
The defence had argued that the court needed to examine the legality of the decision, which prohibits the married father of four from leaving the village and which requires him to report to local police three times a week.
"With some misgivings, the court considers that the basic national interest, at least until December 31, 2015, must take precedence over Faraj's right to a family life, freedom to move freely throughout the country and to choose his own place of residence," read the court's decision.
Krekar's lawyer, Brynjar Meling, appealed the decision and asked that it be suspended pending review.
Krekar has been living under risk of deportation since 2003 after Norwegian authorities ordered him to be expelled, claiming he posed a threat to national security.
While Norway's court system has upheld the ruling, Norwegian law bars him from being deported to Iraq, where he risks the death penalty.
While Krekar acknowledges having co-founded Ansar al-Islam, he insists he has not led the group since 2002.
The preacher and the group Ansar al-Islam figure on United Nations and US lists of terrorist groups or individuals.
COMMENTS (13)
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Perhaps North Sea would have been a better asylum for al those who propagates Hates
The Iraqi Kurds now have an autonomous region in Iraq and this character could be sent back to his home if his behaviour is no longer compatable with the laws of the host country.
Rex Minor
Father of four on a asylum Visa.. Super
@Sunil: looks like u have nothing better to do in life
Indian trolls have woken up!!
First seek refuge... then equal rights.... then start spreading poison... same everywhere.
Looks like where ever there are Muslims there are problems of terror, from the religion of peace.
Pakistan would be the perfect sanctuary.
In the US there is a special facility, which is nearly empty, in an island and it could be used for banishing the free living miscreants.
Any chance of him being deported to ISISLand? After all he can live under the laws he wants?
@Rahul: Officially there is no such country in the world.
Why not deport him to Kurdistan?
The dogs that bite the owner should be put down.