The Ceann Comhairle has ruled that the Regional Group cannot form a Dáil technical group for the purposes of speaking rights.
It marks a significant development in a major dispute that resulted in acrimonious scenes in the Dáil recently.
The ruling comes ahead of a key meeting of the Dáil Reform Committee tomorrow which will seek to resolve the impasse.
Verona Murphy said she had reached her conclusion having carefully considered legal advice, submissions and other materials which are in the public domain.
"I have decided that the Group are not eligible for recognition under Standing Order 170," she said.
The Ceann Comhairle said she was not satisfied that Deputies Michael Lowry, Gillian Toole, Barry Heneghan and Danny Healy-Rae are members "in Opposition" as required by Standing Order 170.
"I therefore cannot accord recognition as a technical group to the Regional Technical Group," she said.
The move is likely to cause concern in the Regional Group who had argued strongly that they required speaking time during Leaders' Questions which is the key part of the Dáil week.
Regional Independent Mattie McGrath described the ruling as unbelievable adding that it was GUBU territory.
It was welcomed by Sinn Féin with Party Chief Whip Pádraig Mac Lochlainn saying it was ridiculous that the Government had contested this position for so long.
A spokesperson for party leader Mary Lou McDonald added: "This is welcome. The Dáil should never have been put in this position.
"This could have been solved two weeks ago. It is a welcome climbdown. The government parties need to act now and accept the Ceann Comhairle's ruling."
Labour Leader Ivana Bacik also said it was a very welcome decision that should have come sooner.
"This vindicates the stance we took across opposition parties and confirms the conclusions of Labour's legal advice," she said.
Meanwhile, Social Democrats Deputy Leader Cian O'Callaghan said it was a significant ruling and confirms what opposition parties have been saying from the outset.
"Government backbenchers cannot masquerade as members of the opposition in a cynical attempt to avail of opposition speaking rights.
"In reaching her decision, the Ceann Comhairle put great weight behind the words of members of the Lowry Independents - who publicly stated they were part of the government.
"She saw through their belated attempt to rewrite history, and claim to be in opposition, as the brazen sham it was.
"Hopefully this will now put an end to this issue and the Dáil can focus on the many pressing issues facing the country. All parties - Government and Opposition - should accept this ruling."
