The three-judge panel yesterday overturned an earlier court ruling in which a judge said that Google could not be held liable for comments posted on a blog because it was not the publisher.
The master of the rolls, Lord Justice Richards, said that if no action was taken against a post containing allegedly defamatory comments for more than five weeks after a complaint was made against it, then Google could be left open to libel action.
Ian De Freitas, a lawyer at Berwin Leighton Paisner LLP, told Bloomberg that this is a "blow" to Google.
"It is a blow to the technology platform providers because the Court of Appeal decided that Google is arguably responsible for the postings by the blogger once they have been notified of them and have failed to take them down," he said.
However, the court also ruled that Google could not be sued in a specific case relating to defamatory comments posted on its blog service.
Payam Tamiz, a 23-year-old law graduate and former Conservative party local council candidate, had sued Google over eight offensive remarks posted in 2011 by other users on his "London Muslim" blog.
Despite the judges acknowledging that some of the comments, including false claims that Tamiz was a drug dealer, were defamatory, they ruled that no libel action could be brought against Google as it was not the publisher.
Judge Stephen Richards, of the UK Court of Appeal, also said that it was "highly improbable that any significant number of readers will have accessed the comments".
He added: "Any damage to the appellant's reputation arising out of continued publication of the comments during the period will have been trivial."
This was the first time that the UK appeals court had looked at whether internet companies were liable when defamatory material is published on their platforms.
Iain Wilson, the lawyer representing Tamiz, said in a emailed statement: "Mr. Tamiz is disappointed with the outcome of the appeal but happy to have played a role in clarifying the law for the benefit of others who might be defamed in online publications."
Tamiz is said to be now considering whether to appeal the ruling in the UK's highest court.
Google said that its service "helps users to express themselves and share different points of view", adding: "Where content is illegal or violates our terms of service we will continue to remove it."