Paya's family had lodged the case at Spain's National Court in August, but judge Eloy Velasco dismissed the suit in a written ruling, saying it was not in his jurisdiction.
Paya, a joint Cuban-Spanish national, and another Cuban dissident, Harold Cepero, died on July 22nd, 2012 in southeastern Cuba after their car went off the road and crashed into a tree.
Paya's death at 60 deprived the Cuban opposition movement of its main leader.
His family alleged in their Spanish lawsuit that an official vehicle of the Cuban state caused the crash.
The driver of the car, Angel Carromero, a leader of the youth wing of Spain's ruling Popular Party, was convicted in Cuba of vehicular homicide. He was sent back to Spain to serve a four-year sentence and was granted conditional release.
Explaining his ruling, Velasco observed that Carromero and the Spanish government had acknowledged Carromero's conviction in the case as part of the deal to have him sent back to Spain.
The judge added that the case did not qualify for "universal jurisdiction", a doctrine under which courts can try serious human rights violations committed in other countries.
Paya was the lead organizer of the Varela Project, a drive for a referendum on guaranteeing rights such as freedom of speech and assembly in Cuba.