Ryan is serving time in a federal prison in Terre Haute, Ind. on racketeering, conspiracy, and other charges, but had asked to be released for a number of reasons.
In November, lawyers argued that Ryan should be granted release in the wake of the U.S. Supreme Court's narrowing of the definition of the honest services law under which he was partly convicted.
Lawyers also pleaded with the court to release him early so he could attend to his ailing wife, Lura Lynn Ryan, who suffers from a terminal disease and has three to six months to live.
His lawyer, Jim Thompson, Tuesday pledged to appeal, and pursue other option for his release.
"If she's denied the motion for the vacation of the mail fraud counts and she's denied our motion for bail, we will immediately go to the seventh circuit court of appeals and file motions," Thompson said during a phone interview with NBC Chicago.
Pallmeyer argues in the opinion that Ryan's case differs significantly from that of Jeffery Skilling, who's name was attached to the honest services ruling rendered by the Supreme Court.
"... Skilling was not the sea change that Ryan urges," Pallmeyer writes.
The Ryan family said they're devastated by the news.
"We're tremendously saddened by Judge Pallmeyer's cold, heartless decision, just seven days after my mom has been told she's dying and given three to six months to live," Ryan's son, George Ryan, Jr., tearfully told reporters outside the family's Kankakee home. "Is this what American justice is now?"
Speaking by phone to the Chicago Sun-Times, Lura Lynn Ryan said merely "we will get through this," adding that her "strength comes from having a wonderful marriage and a trust in the Lord."
Andrea Lyon, another of Ryan's attorneys, said she hoped the appeal came together in time for the Ryans to reunite.
"The bottom line is Mrs. Ryan's going to die, and she's never going see her husband again because she cannot travel," Lyon said.
But Pallmeyer addressed Lura Lynn Ryan's ailing health in her opinion.
"Any sensitive judge realizes that a lengthy prison term effectively robs the convicted person of what we all value most: months and years with loved ones, some of whom will no longer be there when the sentence has been served," Pallmeyer wrote. "Mr. Ryan, like other convicted persons, undoubtedly wishes it were otherwise. His conduct has exacted a stiff penalty not only for himself but also for his family."
The corruption scandal that led to Ryan's conviction ended his political career and left him with a conflicted legacy in Illinois history.
While he's one of four recent governors to be convicted in federal court, he also gained national prominence as an outspoken -- an unexpected -- death penalty critic. Just before leaving office in January 2003, Ryan commuted the death sentences of 167 inmates to life in prison and pardoned four others, declaring the state's capital justice system "haunted by the demon of error."