Adriana Elcira Rivas emigrated to Australia in the late 1970s and worked as a nanny in the beachside suburb of Bondi before she was arrested in 2019 at the request of the Chilean government.
She has been in custody for seven years while resisting attempts to extradite her to the South American nation to face trial for aggravated kidnapping.
Rivas, now in her 70s, is accused of participating in the disappearances of seven people - including a woman who was five months' pregnant - while working for Augusto Pinochet's secret police force.
She denies the allegations and has argued extradition to Chile should be blocked because it would result in her being tried for crimes against humanity.
But the argument she was facing those allegations masquerading as aggravating kidnapping charges was "misconceived", Justice Michael Lee told the Federal Court in Sydney on Tuesday.
"The materials do not suggest the offence for which extradition is sought is anything other than the offences identified throughout the request … namely aggravated kidnapping," he said.
References to crimes against humanity in extradition documents did not change the character of the offences but instead provided context for the application of Chilean domestic law, Justice Lee determined.
Rivas's contention the government failed to consider she may be sentenced for an offence other than kidnapping was similarly flawed, he said.
Justice Lee pointed to the repeated identification of the extradition offences and found there was no basis to conclude Chile sought to prosecute her for other alleged crimes.
"The applicant has failed to demonstrate that the minister's decision was affected by jurisdictional error," he concluded.
The ambassador and consul-general of Chile sat in the public gallery as the decision was handed down.
Families of Chileans who vanished or were killed during Pinochet's rule had packed the courtroom during the two-day hearing, but were not able to be present for the decision.
Their lawyer Adriana Navarro said the families were relieved to have an outcome 15 years after Rivas allegedly fled to Australia to avoid charges.
"This is close to the end of the line for Ms Rivas," she said outside the courthouse.
"(They are) truly, truly delighted."
The long wait had been devastating for families, many of whom still didn't know where their relatives were buried, Ms Navarro said.
"I think psychologically you need to be able to say goodbye to your loved ones, even when you know that they have been assassinated in the most atrocious manner … and these families have not been able to have that," she said.
But the decades of delay have not dampened their determination to find answers and ensure perpetrators face justice, Ms Navarro added.
"The families will not give up," she said.
Tens of thousands of Chileans came to Australia after Pinochet violently overthrew Chile's elected socialist government with a coup in 1973.
About 40,000 people were killed, tortured or imprisoned for political reasons before the end of his ruthless reign in 1990.
Rivas is accused of being a member of a Direccion de Inteligencia Nacional brigade that physically and psychologically tortured the dictator's political opponents.
While Justice Lee's decision clears her path for extradition to Chile, she has the option to lodge an appeal with the Full Federal Court.
