Scots College has failed in its legal bid to increase its student numbers by almost one-third, opening the way for court challenge by nearby residents who claim the boys' school has been concealing its true size for years.

The Bellevue Hill school had sought to modify a council-imposed development consent that states it "shall not exceed 1120 students" with new wording, including that it "must not exceed 1470 students" at its Victoria Road campus.

The college, which had characterised the measure as an attempt to "remove any ambiguity" about its size after a residents' group launched legal action over the issue, took Woollahra Council to the NSW Land and Environment Court after its application was refused.

But the court found on Tuesday that Scots failed to make its case, accepting the council's argument that the school was actually seeking to increase the existing cap by 350 students.

"That increase will in turn generate a significant increase in traffic movements associated with the operation of the campus and exacerbate the existing shortfall in car parking experienced by the residents," the judgment said.

Commissioner Susan Dixon also found that Scots "has not undertaken an adequate analysis of the localised traffic and parking impacts" associated with its application.

A statement from Scots College described the judgment as "disappointing". "The document is lengthy and the College will consider it carefully and in full before making any further decisions," it said.

The case is just the latest legal blow to the development ambitions of the college, which has expanded its footprint in recent years by buying up neighbouring properties.

In April, Scots failed to overturn the rejection of its plans to turn a $4.8 million house into an early learning centre due to the "unsafe and risky" behaviour of parents when dropping off or collecting their children from its preparatory school.

Residents' group Concerned Scots Neighbours, which has long argued that Scots had exceeded its permitted student numbers, said the lack of on-site drop-off facilities and a shortfall of about 200 car spaces "has created an environment of not if a tragic accident will occur, but when".

"This, and the previous decisions, clearly draw a line in the sand and say to Scots that it must abide by the same traffic safety standards that other schools in our municipality abide by," the group's spokesman, Paul Blanket, said.

Mr Blanket said Tuesday's decision cleared the way for the group's legal action to determine whether Scots is in breach of its existing student cap – a claim the school rejects.

"We will be reviewing this decision with our legal team and will shortly determine how we will now proceed with our case," Mr Blanket said.

Woollahra's mayor, Toni Zeltzer, welcomed the court's decision about the long-standing "issue of contention" between the council, school and residents.

"We have been concerned about the safety of children in circumstances where the college has increased student numbers without making provision for appropriate drop-off and pick-up and without adequate provision for off-street parking," Cr Zeltzer said.

"We now hope that Scots will satisfactorily address the amenity impacts associated with their increase in student numbers."