The Corps of Engineers had sought to have the case moved to Delaware, where a judge ruled in February that the project could begin.
On Monday, U.S. District Judge Joel Pisano said the case belongs in New Jersey largely because that's where the dredge spoils are to be disposed of.
New Jersey environmental officials and environmental groups oppose the project to deepen 102 miles of the Delaware River channel below Philadelphia, saying it threatens water quality.
Proponents say the dredging will create jobs by boosting port business.
