By a majority of 6-3, the high court found that Environmental Protection Agency did not have the power to set broad caps on emissions from coal-fired power plants, which produce nearly 20 percent of the electricity consumed in the United States.
The decision sets back Biden's hopes of using the EPA to bring down emissions to meet global climate goals.
It was a significant victory for the coal mining and coal power industry, which had been targeted for tough limits in 2015 by the administration of then president Barack Obama in an effort to slash carbon pollution.
It was also a victory for conservatives fighting government regulation of industry, with the court's majority including three right-wing justices named by former president Donald Trump, who had sought to weaken the EPA.
While EPA had the power to regulate individual plants, the court ruled, Congress had not given it such expansive powers to set limits for all electricity generating units.
The majority justices said they recognized that putting caps on carbon dioxide emissions to transition away from coal-generated electricity "may be a sensible solution" to global warming.
But they said the case involved a "major question" of US governance and jurisprudence and that the EPA would have to be specifically delegated such powers by the legislature.
"It is not plausible that Congress gave EPA the authority to adopt on its own such a regulatory scheme," they said.
"A decision of such magnitude and consequence rests with Congress itself, or an agency acting pursuant to a clear delegation from that representative body," they said.
The three-member liberal minority of the cases castigated the majority for overruling powers they said EPA did in fact have.
"Today, the court strips the Environmental Protection Agency of the power Congress gave it to respond to 'the most pressing environmental challenge of our time,'" they said.