Guillaume de Villiers, 34, has been accused by his brother Laurent, 28, of multiple rapes between 1994 and 1997, when Laurent was between 10 and 13 years old.
After a complaint was filed in 2006, Guillaume de Villiers, who denies his brother's allegations, was charged in 2010 but a court in Versailles dropped the charges for lack of evidence.
The Lyon court, which heard the case after an appeal by Laurent was upheld by France's top judicial body, the Court of Cassation, decided "there was insufficient evidence," said Alexandre Varaut, Guillaume de Villiers' lawyer.
"We will obviously appeal," said Laurent de Villiers' lawyer Dominique Tricaud. "The law has failed him twice and this has to stop now."
Viscount Philippe Le Jolis de Villiers de Saintignon, 63, head of the conservative Mouvement pour la France and a member of the European Parliament, has denounced the case as a "disgraceful" smear campaign aimed at derailing his political ambitions.
He has twice stood for president of France on a conservative nationalist ticket, but was knocked out in the first round on both occasions.
He is best known outside France for his claims of growing Islamic influence in the country, his links to eurosceptic groups and for popularising the phrase "Polish plumber" to refer to the perceived threat of eastern European workers in France.