The European Union's second-highest court, the General Court, ruled that Mi Pad should not be registered as a trademark because consumers were likely to be confused by the similarity of the signs.
Xiaomi's Mi Pad and Apple's iPad are both tablet computers.
"The dissimilarity between the signs at issue, resulting from the presence of the additional letter 'm' at the beginning of "Mi Pad", is not sufficient to offset the high degree of visual and phonetic similarity between the two signs," the Court said in a statement.
Xiaomi filed an application in 2014 with the EU Intellectual Property Office (EUIPO) to register Mi Pad as an EU trademark.
Apple subsequently lodged a complaint that the EUIPO upheld in 2016 on the grounds that consumers would think Mi Pad was a variation on Apple's iPad trademark.
The court agreed with the EUIPO's decision and said English-speaking consumers were likely to understand the prefix "mi" as meaning "my" and therefore pronounce the "i" of Mi Pad and iPad in the same way.
Xiaomi can appeal against the ruling at the EU's highest court, the Court of Justice of the European Union.
© Thomson Reuters 2017