The European Court of Justice on Thursday ruled authorities can order that animals be stunned before slaughter in a move that Muslim and Jewish groups say curtails their religious freedom.
The court backed a regulation imposed in the Flemish region of Belgium, in a move regarded as effectively outlawing the Muslim halal and Jewish kosher traditions.
"The court concludes that the measures contained in the decree allow a fair balance to be struck between the importance attached to animal welfare and the freedom of Jewish and Muslim believers to manifest their religion," the ruling said.
The decision now paves the way for other EU countries to follow suit.
An umbrella organisation for Jewish groups in Belgium slammed the decision as a "denial of democracy" that did not respect the rights of minority groups.
"The fight continues, and we will not admit defeat until we have exhausted all our legal remedies, which is not yet the case," said Yohan Benizri, head of the Belgian Federation of Jewish Organisations.
Israel's ambassador to Belgium and Luxembourg, Emmanuel Nahshon, reacted angrily to the ruling, calling it "a catastrophic decision, a blow to Jewish life in Europe".
Belgium's Flanders regional government issued the order in 2017 which took effect in 2019. Animal rights activists had pushed for the ban.
The argument was made by the authorities in Belgium that the measure would reduce animals' suffering but it was widely perceived as being aimed at the Muslim halal tradition.
The case will return to Belgium's constitutional court, which asked the EU court to rule on the issue. It is bound by the EU court's decision.