Ewa Jasiewicz has been held in a detention centre since appealing a decision to deny her entry into the West Bank and Gaza over two weeks ago.
Her lawyer said he would challenge the deportation order.
Jasiewicz had come to the occupied territories to write a story on the Israeli Left for Britain's Red Pepper magazine.
A Tel Aviv District Court had ruled last week that the British journalist "is not a threat to Israeli security" and should be released from detention, but the state attorney's office appealed the decision.
Jasiewicz lost the appeal on Wednesday when the second judge felt that despite not posing a security risk, her "naïvete" and "ideological beliefs" could be taken advantage of.
His decision was based on secret evidence that neither Jasiewicz nor her lawyer was allowed to see.
Her attorney, Yael Barda, said he would appeal the decision before Israel's High Court of Justice.
The UK-based National Union of Journalists strongly condemned the decision and declared that Jasiewicz's detention was "state interference in the work of a journalist that should be anathema to a democratic society".
There has also been a Europe-wide call to release Jasiewicz.
In an exclusive interview from her detention centre in Tel Aviv, Jasiewicz told Aljazeera.net she believed she was singled out upon entry because she was an advocacy journalist who promoted human rights and social justice.
"Israelis tried to tell me I can't do that ... I cannot be a journalist and an advocate," said Jasiewicz.
Earlier, journalist Peter Hounam
was deported for security issues
Jasiewicz says the labelling of advocacy journalists by Israel as "security threats" is designed to alienate them from Palestinian communities and "the brutal reality of life under Israeli occupation".
"It is designed to criminalise social relationships with Palestinians, who are as an entire population labelled a security threat. It is an attempt to prevent me and others from witnessing yet more violations, active collective punishment, and killings" she said.
Jasiewicz had volunteered with the non-violent peace group International Solidarity Movement (ISM) two years ago, and it was then that she witnessed and reported on the killing of a 13-year-old Palestinian boy, Baha al-Bahish, by an Israeli occupation soldier in Nablus.
Jasiewicz also watched as Israeli machine gun fire hit US peace activist Brian Avery’s face in Jenin early last year.
Jasiewicz says she will argue in court that the state of Israel should not have the power to define people's social relationships.
"At what point do social relationships with people implicate someone as security threat?" asked Jasiecwiz rhetorically, noting that the Israeli army regards all men between the ages of 15-30 as a "security threat".
"They are equating social relationships with political relationships. But social relationships need to happen to foster coexistence and Israel is doing everything it can to prevent that. It is encouraging conditions of apartheid, and the wall is [a] most obscene and stark example of this."
Jasiewicz says the Israeli intelligence apparatus has been discredited and forced into a climbdown by her legal challenge. She says they have resorted to personal attacks to denounce the type of journalism and activism she stands for.
"My case demonstrates the dubious and trumped-up nature of the Israeli secret services [and of] secret evidence and its manipulation for the suppression of advocacy journalism and human-rights activism."
"In failing to prove that I am a security threat, the Israeli state has resorted to attacking my integrity, experience, and intelligence as a journalist through the Kafkaesque decree that I am an unwitting security threat, naïve and easily manipulated by 'cunning Palestinian territorists' that could be anyone, anywhere," she told Aljazeera.net.
"It's ludicrous, its sexist, and it's racist because it insults the Palestinian communities I've worked with."
In line with a plan drafted by the Israel army and the Foreign and Defence Ministries last year, Israel decided to bar pro-Palestinian activists from entering the country and will try to expel many of those who are already here. Dozens of activists have already been arrested and denied entry arbitarily, according to Israeli legal sources.
"The Israeli army is trying to [portray] such journalists and international human-rights activists as people who don't know what's going on, as unwitting and naïve," said Jasiewicz.
Peace activists have often been
beaten up by the Israeli police
"But I know my territory - I know what I'm doing. I've lived with Palestinian communities through invasions, curfews, incursions, arbitrary round-ups and arrests. I've seen Palestinians being used as human shields, I've seen killings and shootings," she said in response to the Israeli judge’s verdict that she could easily be manipulated by Palestinians.
Jasiewicz believes her presence in the Occupied Territories questions Israel's claim that its army is a humane one.
"I disrupt the propaganda that Israeli operations [in the Occupied Territories] are policing operations when in fact they are part of a politial process aimed at transfering the Palestinians out of their land," she said.