Stop Inn Time opened in a former DIY shop on Brinsworth Lane, Brinsworth in 2019.
The seats and canopies were added at the rear during the pandemic, when planning regulations were eased to allow more socially-distanced arrangements.
After the rules reverted, Rotherham Council decided the outdoor section was causing noise and disturbance to neighbours.
There had been 12 objections and three letters in support of the development.
The pub appealed this rejection of permission but the Planning Inspectorate has sided with RMBC.
Planning inspector A Berry said: “I acknowledge that the development provides employment opportunities and that it is considered beneficial and an enhancement to Brinsworth by some.
“However, this does not provide sufficient justification to outweigh the harm I
have found in respect of the main issue.
“The potential removal of the outdoor seating area may deter people from utilising the premises and could have a detrimental financial effect on the existing business.
“However, this has not been substantiated with evidence, and the information before me suggests that the business operated without the outdoor seating area prior to the pandemic.”