BBC - Spencer Elden, 31, said his appearance on the front of the Nevermind record constituted child sexual abuse.
But the judge said he had left it too late to claim he had been exploited.
Mr Elden's legal avenues are now all but exhausted as he cannot re-file the case, but his legal team told US media he would appeal against the ruling.
The lawsuit focused on a photograph of Mr Elden, which depicted him swimming naked in a pool towards a dollar bill pierced with a fish hook.
He argued that he had been unable to consent to the picture being used. He was seeking $150,000 in damages.
Photographer Kirk Weddle was among the defendants, as were former Nirvana members Dave Grohl and Krist Novoselic, as well as Courtney Love, the widow of late singer Kurt Cobain.
Mr Elden filed his case in 2021, arguing that he was still within his rights to complain about the decades-old image because it had continued to cause him distress and lost earnings into adulthood.
The lawsuit was dismissed and then re-filed in January.
The Los Angeles judge ruled on Friday that Mr Elden lodged his case well beyond the 10-year statute of limitations.
Welcoming the verdict, a defense lawyer said the case had been "meritless."
Mr Elden's parents were paid $200 for the photo in 1991 by what was then a relatively unknown band.
Worldwide sales of Nevermind went on to surpass 30 million, making it one of the best-selling albums of all time.
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