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Facebook can insist that its customers use their real personal data when registering on the site, a German court ruled in a decision published on Friday.
The administrative court in the northern state of Schleswig-Holstein slapped down an order from regional data protection officials that Facebook change its policy on collecting personal details.
Facebook asks its customers to provide their real full name, email address, gender and date of birth when registering. If the firm finds false data have been given, it blocks the account until proof of identity is provided.
The Independent Regional Centre for Data Protection in Schleswig-Holstein (ULD) ordered Facebook to offer users the chance to give pseudonyms and to unfreeze accounts blocked for using false data.
It threatened Facebook with a fine of 20,000 euros ($26,715) in case of non-compliance.
However, the court said the ULD had no right to order Facebook to unblock accounts.
Facebook's German office is responsible solely for marketing, the court ruled.
ULD chief Thilo Weichert described the ruling, made on Thursday but only made public on Friday, as "mind-boggling" and vowed to take the case to a higher court.
Facebook has fallen foul of Germany's tough privacy laws in the past, notably last year when authorities said its facial recognition software violated users' privacy.