The court in Paris ruled that the complaint had not clearly defined the case for defamation. Deschamps has 10 days to appeal.
Deschamps sued Cantona over comments he made ahead of Euro 2016.
He appeared to suggest Deschamps left out two players from the French squad because of their African origin.
With reference to Karim Benzema and Hatem Ben Arfa, Cantona told the Guardian newspaper at the time: “Benzema is a great player. Ben Arfa is a great player.
“But Deschamps, he has a really French name. Maybe he is the only one in France to have a truly French name,” the former Manchester United striker said.
He went on to say: “Ben Arfa is maybe the best player in France today. But they have some origins. I am allowed to think about that.”
Deschamps’ lawyer at the time called the remarks “unacceptable, slanderous and defamatory”.
Benzema was not selected to play in the European Championship after he was issued with a domestic ban for his involvement in an alleged blackmail scandal over a sex tape. Ben Arfa stayed on the standby list.
Cantona’s lawyer welcomed Friday’s court ruling, claiming it a “victory”, and saying “justice had been done”.
Deschamps, who are former France teammates, have fallen out numerous times since they played together in the mid-1990s.
Cantona previously called Deschamps a “muppet” and a “vulgar water carrier”, a football insult implying Deschamps was good only to pass the ball to others.
Cantona was dropped from the French national team in 1995 after he attacked a fan during a Manchester United game with a kung fu-style kick, and never played for France again.