The public broadcaster on Monday failed in its legal bid to block the Australian Federal Police poring over documents seized in a controversial raid last year.

ABC News director Gaven Morris says the decision is a blow to democracy.

"It's clear that the way public interest journalism is able to be undertaken in this country is a mess," he told reporters outside court in Sydney.

"Fundamentally the court has ruled the AFP has the right to enter a newsroom and fossick around in confidential files.

"This should send a chill down all our citizens' spines."

Mr Morris said the ABC would weigh up an appeal of the decision.

ABC News executive director John Lyons says the public should not underestimate the damaging potential of the court's decision.

"It's about the person in the hospital or the school or the local council who sees something bad going on and wants to trust a journalist," he told the ABC.

Police last year raided the ABC's central Sydney head office following 2017 news reports revealing Australian defence personnel may have committed war crimes in Afghanistan.

Dubbed the Afghan Files, the stories were based on leaked Defence Department papers.

The national broadcaster argued it was "legally unreasonable" for federal police to seek a warrant to search its head office and for a registrar to grant it.

The case was dismissed by Federal Court Judge Wendy Abraham in Sydney on Monday, with the ABC ordered to pay costs.

In her published judgment, Judge Abraham said the ABC had failed to prove the police search warrant was invalid.

"In the event I am wrong and had I decided otherwise, I would not have ordered the material seized be returned to the (ABC)," she wrote in her judgment.

ABC managing director David Anderson says the AFP raid was an attempt to intimidate journalists.

"This ruling highlights the serious problem with Australia's secrecy laws," he said in a statement.

"The ABC calls on the AFP to resolve this issue as a matter of urgency and drop its threat against our journalists."

Alliance for Journalists' Freedom spokesman Peter Greste - whose reporting landed him in an Egyptian jail - said a legal overhaul was needed.

The home of News Corp journalist Annika Smethurst was also raided by federal police last year over a 2018 story detailing a government proposal to spy on Australians.

An AFP spokeswoman says the organisation respects the court's decision and is unable to comment further because their investigation into the ABC is ongoing.

Australian Associated Press