The BBFC has been given "no alternative" but to issue Manhunt 2 with an 18 certificate.
The Video Appeals Committee voted by a majority of four to three to allow the long-contested game to go on sale in the UK.
Manhunt 2 was was resubmitted to the VAC in January, to be judged under "new guidelines" specified by the High Court.
The BBFC has routinely opposed the game and was not happy at the result.
"As I have said previously, we never take rejection decisions lightly, and they always involve a complex balance of considerations," said BBFC director David Cooke.
"We twice rejected Manhunt 2, and then pursued a judicial review challenge, because we considered, after exceptionally thorough examination, that it posed a real potential harm risk.
"However, the Video Appeals Committee has again exercised its independent scrutiny. It is now clear, in the light of this decision, and our legal advice, that we have no alternative but to issue an 18 certificate to the game."
No new release date for Manhunt 2 has been announced.