Wa Lone, 32, and Kyaw Soe Oo, 28, were handed a seven-year sentence last September under a colonial-era law for allegedly breaching the Official Secrets Act as they investigated the killing of 10 Rohingya men in Rakhine.
But in a ruling, Judge Aung Naing called their terms "a suitable punishment".
The reporters' legal team can lodge an appeal with Burma's supreme court, but a presidential pardon would be an alternative option to securing their release.
"Canada joins the global community in reiterating our call for the immediate release of Wa Lone and Kyaw Soe Oo so they may regain their freedom and continue their vital work".
Reuters Editor-in-Chief Stephen Adler said, in a statement, that the two men "remain behind bars for one reason: those in power sought to silence the truth". "Reporting is not a crime, and until Myanmar rights this bad wrong, the press in Myanmar is not free, and Myanmar's commitment to rule of law and democracy remains in doubt". At the time of the arrest they were probing a massacre of 10 Rohingya.
Options are dwindling for the two young men.
"A free and independent press should be protected in any democracy", Palladino said in a Friday statement.
The reporters' work and stand for freedom of the press have earned them awards and plaudits. We can not stand by and accept this antidemocratic decision.
This morning, however, a judge ruled that it was a "reasonable decision" that was "not wrong according to the law" as he dismissed the appeal. Myanmar authorities must release the two journalists immediately and unconditionally. They told the appeal court the lower court that tried the case had wrongly placed the burden of proof on the defendants.
The defense also said prosecutors had failed to prove the reporters gathered and collected secret information, sent information to an enemy of Myanmar or that they had an intention to harm national security. He said they meant to harm national security and the national interest. "It can not be said that it was a set-up", he said.
"I lost all my hope", a weeping Chit Su Win, the wife of reporter Kyaw Soe Oo, said after the verdict.
United Nations investigators have called for top generals to be investigated for genocide and singled out civilian leader Aung San Suu Kyi for criticism for failing to stop the crackdown.
Jeremy Hunt, the British foreign secretary, who made earlier pledges to champion the journalists' cause, on Friday called on Ms Suu Kyi to take a "personal interest" in the case.
Myanmar government spokesman Zaw Htay was not available for comment.
European Union ambassador to Myanmar Kristian Schmidt, who attended the hearing, described the ruling as "a great disappointment and a missed opportunity to correct a wrong that has been committed against the two journalists".
Speaking to AFP just before the verdict was due, Reporters Without Borders representative Daniel Bastard said it would be "utterly devastating" if the court upholds the verdict. "We are very disappointed with the judgment", he said.