US district judge Robert Wilkins said the American government is free to proceed with the case that alleges Armstrong defrauded the government by accepting sponsorship money from the US Postal Service while using performance-enhancing drugs throughout his career.
Along with four of his colleagues, Armstrong was called to testify under oath this month for the lawsuit. Armstrong's lawyers had requested that the federal courts delay such testimony until they receive the discovery evidence that they have requested.
The government is aiming to recover nearly $100 million under the False Claims Act.
"The court denies without prejudice the defendants' motion to dismiss the government's action as time-barred," Wilkins wrote in his opinion.
The Justice Department claimed the reputation of the US Postal Service was tainted by Armstrong's confession that he used performance enhancing drugs on the way to winning the Tour de France for seven consecutive years.
US Postal contributed around $40 million as title sponsor of Armstrong's team between 1998 and 2004. According to the US government's complaint it is believed that $18 million went to Armstrong.
Armstrong had moved to dismiss the lawsuit in November 2013. Armstrong's lawyer Elliot Peters argued that the Postal Service should have known back in 2000 as it was aware that French authorities had begun an investigation into allegations that the team was doping when its sponsorship agreement came up for renewal.
"They did absolutely nothing to investigate" said Peters.