The 4th US Circuit Court of Appeals had earlier said in a split decision that the
president did have such powers of detention.
But it said al-Marri must be given the chance to persuade a federal judge that he is not what the US calls an "enemy combatant".
The US describes al-Qaeda and Taliban suspects held as part of its so-called war on terror as enemy combatants.
Al-Marri's lawyers argued the case was of such constitutional importance that it
should be heard by the supreme court now.
However, the case will not be argued before March, meaning Barack Obama, the US president-elect, will be in the White House when it is heard.
The Bush administration suffered a blow in June when the supreme court ruled that prisoners held at the US military base at Guantanamo could go before federal judges in Washington to seek their release.
It also ruled against the Bush administration in three other so-called war on terror cases in 2006 and 2004.
Al-Marri arrived in the US on a student visa with his wife and five children on September 10, 2001, only one day before the attacks in New York and Washington.
He was arrested three months later as part of the Federal Bureau of Investigation's investigation of the September 11 attacks.
Prosecutors indicted him on charges of credit card fraud and lying to the FBI, not terror charges.
But in June 2003, Bush said al-Marri had vital information about terror plots, declared him an enemy combatant and ordered him transferred to military custody.
The government alleges al-Marri trained in al-Qaeda camps and met bin Laden and Khalid Sheikh Mohammed, the alleged mastermind of the September 11 attacks.
They also said a seized laptop in his possession held files on poisons, coded e-mail messages and lectures by bin Laden and others.
He has been held in virtual isolation on a US navy prison ship near Charleston, South Carolina, for almost five and a half years.