The challenge, which was lodged on behalf of an Iranian asylum seeker, claimed the designation of Papua New Guinea as a regional processing country was in breach of the constitution.

It also claimed that the removal of the asylum seeker from Christmas Island to PNG was illegal.

But the full High Court rejected the case on both grounds and said the costs of the case should be met by the asylum seeker, who was represented by lawyers Mark Robinson, SC, and Jay Williams.

It also found that former Labor immigration minister Chris Bowen was not in breach of the Migration Act when then prime minister Kevin Rudd announced the PNG asylum seeker solution in July last year.

A decision on a separate challenge to the indefinite detention of asylum seekers at the centre will be handed down soon.

Mr Robinson said his client, an Iranian asylum seeker in his late 20s, was devastated at the result.

''It's devastating for the client,'' Mr Robinson said. ''It means that he has to remain in PNG in terrible conditions.''

Mr Robinson said the man had arrived in Australia on July 23, before being ''physically removed'' on August 2. The case has been in the courts since August last year.

''As long as the Minister thinks it's in the national interest of Australia, he or she can pick any country and we can dump our refugee applicants on that country and leave them there.''

Mr Robinson said it was a ''test case'' to ascertain whether or not the provisions of the act were valid and whether the minister's designation of PNG as a regional processing country were valid.

''There are a lot of questions that remain to be answered and they are whether we control the detention centres and whether we are treating the refugees and the refugee applicants with appropriate dignity and conformity with international conventions.''

Immigration spokeswoman for the Greens, Sarah Hanson-Young, maintained the Manus Island camp was not safe for refugees.

"The High Court has ruled Manus Island as constitutional, but what remains true is that these camps of cruelty are inhumane, unsafe and untenable for refugees," she said.

"Dumping refugees in unsafe conditions on Manus Island may be constitutional but it's certainly not morally acceptable and is still in breach of international law."

Immigration Minister Scott Morrison said he welcomed the decision.

“Offshore processing remains part of the full suite of border protection measures the Coalition government is implementing under Operation Sovereign Borders that is stopping boats,’’ he said.

“For this policy to be effective, it must be implemented in conjunction with turning back boats where it is safe to do so, and denying permanent visas for those who had already arrived illegally in Australia.''

Mr Morrison said it had been almost six months since the last people-smuggler boat landed on Australian shores.

Prime Minister Tony Abbott also used the decision to reconfirm his commitment to stopping boats.

''I am very pleased that we are approaching six months without any successful people smuggling ventures to Australia,'' Mr Abbott told reporters outside the National Gallery in Canberra.

''This is a very important policy for our country, it's also a very important policy for human welfare the most compassionate thing you can do is to stop the boats, prevent the drownings at sea and that is exactly what this government is doing.''

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