The ruling added to a string of decisions in which the two appointees of George Bush, the US president -- Chief Justice John Roberts and Justice Samuel Alito -- have shifted the court sharply to the right on divisive social issues such as race and abortion.
Roberts said in writing for the court majority that racial balancing was not permitted.
"The way to stop discrimination on the basis of race is to stop discriminating on the basis of race," he said.
"The next president of the United States will be able to determine whether or not we go forward or continue this slide"
US Senator Joseph Biden, Delaware
The court's four liberal members said that the ruling threatened the Supreme Court's historic Brown versus Board of Education decision in 1954 that outlawed racial segregation in US public schools.
"The last half century has witnessed great strides toward racial equality, but we have not yet realised the promise of Brown," Justice Stephen Breyer wrote.
"This is a decision that the court and the nation will come to regret."
Justice John Paul Stevens, in a separate dissent, said, "There is a cruel irony in the chief justice's reliance on our decision in Brown v. Board of Education."
The Supreme Court addressed similar issues in 2003 when it ruled by five to four that racial preferences could be used in university admission decisions. Since then, Justice Sandra Day O'Connor, who authored that opinion, was replaced by Alito.
Roberts and Alito were joined by Justices Antonin Scalia, Anthony Kennedy and Clarence Thomas, the court's only black member, who wrote a separate opinion emphasising his view that the US Constitution was "colourblind".
It marked the first time the court had addressed a school district's voluntary use of race-based pupil assignments for a purpose other than to remedy the effects of past segregation.
The ruling could force the revamping of race-based admissions and school selection procedures nationwide.
Many opponents of the positive discrimination ruling applauded the ruling. Sharon Browne of Pacific Legal Foundation, said: "Now, an estimated 1,000 school districts around the country that are sending the wrong message about race to kids will have to stop."
Democratic presidential candidates quickly denounced the decision and carried the theme into Thursday evening's Democratic debate.
New York Senator Hillary Clinton said in a statement said: "Once again, the Roberts court has shown its willingness to erode core constitutional guarantees."
Senator Barack Obama of Illinois called it a "wrong-headed ruling," while former Senator John Edwards of North Carolina termed the decision "deeply saddening".
Joseph Biden, Delaware's senator said: "The next president of the United States will be able to determine whether or not we go forward or continue this slide."