The Lacock Cup, which dates back to the 1400s, was loaned to the museum from St Cyriac’s Church in Lacock in 1962.
The church now wants to sell the cup to raise funds for repairs, but this had been opposed by a local resident so a church court was set up to decide.
At the consistory court the Reverend Justin Gau said he was satisfied the sale circumstances were justified.
Geoffrey Fox, who objected to the sale, now has 28 days to consider whether or not he wants to appeal the decision.
He said he was “very disappointed” by the ruling.
The British Museum said the cup was in “near perfect condition”
A group of residents had campaigned against the sale believing the cup was a vital part of the village’s heritage.
Church warden Tony Bruun said because St Cyriac’s was a medieval church the maintenance needed was considerable.
He said the church had spent more than £400,000 over the past 10 years on repairs and maintenance and that figure did not include any restoration work.