WikiLeaks founder Julian Assange, who has been arrested in Britain on Swedish allegations of sex crimes.
Prosecution lawyer Gemma Lindfield announced the decision at a court hearing on Tuesday, without giving reasons.
Assange had been granted bail with strict conditions by a London court, but must now remain in jail pending the outcome of the appeal.
The 39-year-old Australian applied for bail on Tuesday a week after being remanded to custody on a European arrest warrant issued by Sweden.
Earlier in the day, Assange's supporters, gathered outside the Westminster magistrate's court, cheered when they heard Assange had been granted bail, the terms of which included wearing an electronic tag, living at a registered address, observing a curfew and lodging $317,400 with the court.
The website founder's lawyers have previously said the charges against him are politically motivated after thousands of US diplomatic cables released by WikiLeaks angered governments around the world.
Statement from prison
Earlier Assange denounced Visa, MasterCard and Paypal for blocking donations to his website in the wake of the release.
Speaking to his mother from his prison cell, Assange said the firms were "instruments of US foreign policy" but said their actions would not stop WikiLeaks from continuing to publish 250,000 cables.
"My convictions are unfaltering. I remain true to the ideals I have expressed," he said in a statement to Australian television, dictated by his mother Christine Assange.
"These circumstances shall not shake them. If anything, this process has increased my determination that they are true and correct."
Assange was accused in August of sexual misconduct by two female Swedish WikiLeaks volunteers during his stay in Sweden.
A Swedish prosecutor wants to question him about the accusations, although the chief prosecutor, Eva Finne, cancelled a previous arrest warrant on the grounds that there was no "reason to suspect that he committed rape".
The crime Assange is suspected of is the least severe of three categories of rape, carrying a maximum of four years in jail.
Assange has voiced fears along with his lawyers that US prosecutors may be preparing to indict him for espionage after embarrassing leaks by his website.
The US justice department has been looking into a range of criminal charges, including violations of the 1917 Espionage Act, that could be filed in the WikiLeaks case.
Assange's Swedish lawyer has said he would fight any attempt to extradite his client.
Al Jazeera and agencies