Adriana Elcira Rivas emigrated to Australia in the late 1970s and worked as a nanny in the eastern suburb of Bondi before she was arrested by the NSW Police in 2019 at the request of the Chilean government.
She has been in custody for seven years as she resisted attempts to extradite her to the South American nation to face trial for seven counts of aggravated kidnapping.
Rivas, now in her 70s, is accused of participating in the disappearances of seven people - including a woman who was five months' pregnant - while working for Augusto Pinochet's secret police force.
She denies the allegations and has argued her extradition to Chile should be blocked because it would result in her being tried for crimes against humanity.
But the argument that the offences had been mischaracterised was "misconceived", Justice Michael Lee told the Federal Court in Sydney on Tuesday.
"The materials do not suggest the offence for which extradition is sought is anything other than the offences identified throughout the request … namely aggravated kidnapping," he said.
Rivas' contention that the government failed to consider the time limit for prosecuting the kidnapping offences had expired was similarly flawed, the judge determined.
"The applicant has failed to demonstrate that the minister's decision was affected by jurisdictional error," Justice Lee said.
The ambassador and consul-general of Chile sat in the public gallery as the decision was handed down.
Families of Chileans who vanished or were killed during Pinochet's rule had packed the courtroom during the two-day hearing, but were not able to be in the court for the decision.
Tens of thousands of Chileans came to Australia after the dictator violently overthrew the nation's elected socialist government with a coup in 1973.
About 40,000 people were killed, tortured or imprisoned for political reasons before the end of his ruthless reign in 1990.
Rivas is accused of playing a role in a Direccion de Inteligencia Nacional brigade that physically and psychologically tortured members of the communist party who opposed Pinochet's regime.
Adriana Navarro, who represents the families, previously said more than 1100 Chileans have still not been found.
"We have a very good idea of what happened to them and we think Ms Rivas may do too," Ms Navarro told AAP outside court during the hearing.
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