The project comprises 14 miles of additional fencing in San Diego. In September, Homeland Security Secretary Michael Chertoff waived all laws and legal challenges to building the final 3 1/2-mile leg through coastal wetlands to the Pacific Ocean.
The Sierra Club and other environmental groups had argued that Chertoff lacked the authority to do what he did.
But U.S. District Judge Larry Burns said Congress delegated such authority to Chertoff in June. He noted that the executive branch already had significant jurisdiction over national security and immigration.
Cory Briggs, an attorney representing the environmental groups, said he was undecided whether to appeal.
Litigation has stalled the project since it was approved by Congress in 1996. Last year, the California Coastal Commission refused to grant permits, saying damage to sensitive habitats outweighed security benefits.
In a lawsuit in 2004, the Sierra Club said the project threatened the Tijuana River estuary, home to more than 370 migratory and native birds, six of them endangered.
The proposal calls for adding two fences to an existing barrier made of Navy landing mats. A maintenance road would be built between the primary and secondary fences, along with lights, sensors and cameras.
The 2006 Homeland Security budget includes $35 million to cover most of the work.
The final leg of the fence would cross steep, rugged canyons including "Smuggler's Gulch," a maze of trails once overrun by illegal border crossers. The federal government launched a crackdown in the area in 1994, forcing migrants to cross in more remote areas.