The social media giant hailed the ruling, saying it showed the class-action lawsuit had been unnecessary and defending its record on guarding customers' privacy.
But 27-year-old Max Schrems said he would appeal against the decision and fight on, as the court had not killed off the case entirely, but referred it on to a higher tribunal.
The law student is claiming EUR 500 (roughly Rs. 35,350) in damages for each of the more 25,000 signatories of his lawsuit - the latest in a series of European challenges to US technology firms and their handling of personal data.
Facebook's lawyer presented a long list of procedural objections to the Vienna court in April, questioning Schrems' status as a private Facebook consumer and whether the 25,000 plaintiffs were legally allowed to confer their rights on him.
The court said Schrems was not a private consumer and that it had no jurisdiction over the case, Schrems said in an emailed statement. The court was not immediately available for comment.
"This finding by the court is really very strange. Unfortunately it seems like the court wanted to forward this hot potato to the higher courts," Schrems' lawyer, Wolfram Proksch, said in a statement.
"This litigation was unnecessary and we're pleased that the court has roundly rejected these claims," a spokesman for Facebook said. "We remain happy to work with our regulator, the Irish Data Protection Commissioner, to address any questions about our commitment to protecting people's information."
European politicians have grown increasingly concerned about Facebook, Google and other American companies' domination of the Internet industry, and have sought ways to curb their power.
Schrems also has a case pending at the European Court of Justice financed by crowd-sourcing, which mainly relates to the so-called Safe Harbor agreement governing data transfers from Europe to the United States.
© Thomson Reuters 2015