The state Supreme Court upheld "Kyleigh's Law" in a ruling Monday.
In a unanimous opinion, the high court ruled that requiring the decals doesn't violate federal privacy laws or laws against unreasonable search and seizure. An appeals court had ruled similarly last year in a challenge brought by two parents.
The law is named for a New Jersey teenager who was killed in a 2006 crash. It's meant to aid police in enforcing restricted privileges for young drivers.
Opponents say displaying the decals could leave teen drivers vulnerable to predators. But a report last year found only one reported incident in which an underage driver was stopped by someone impersonating a police officer.