American-Canadian Watson, who has been detained since his arrest in Nuuk in July, has appealed the court's decision, the statement added.
"The court in Greenland has today decided that Paul Watson must continue to be detained until September 5th, 2024, in order to ensure his presence in connection with a decision on the issue of extradition," said the statement.
Watson, 73, is fighting efforts by Japan to have him extradited to stand trial there for a 2010 confrontation with Japanese whalers.
But Thursday's Greenland police statement said the court had ruled that Watson must be held until September 5th "to ensure his presence in connection with a decision on the issue of extradition".
Watson told AFP on Thursday that his detention in Greenland pending possible extradition to Japan increased pressure on the Asian country over its whaling practices.
"It puts more pressure on Japan for their illegal whaling activities," the 73-year-old campaigner said.
Watson, who featured in the reality TV series "Whale Wars", founded Sea Shepherd and the Captain Paul Watson Foundation (CPWF), is known for radical tactics including confrontations with whaling ships at sea.
He was arrested on July 21st when his ship John Paul DeJoria docked to refuel in Nuuk, the capital of the autonomous Danish territory.
The vessel was on its way to "intercept" a new Japanese whaling factory vessel in the North Pacific, according to the CPWF.
He was detained on the basis of a 2012 Interpol "Red Notice" after Japan accused him of causing damage to one of its whaling ships in the Antarctic two years earlier and causing injury.
Japan in late July asked Denmark to extradite Watson.
But his arrest has sparked a series of protests calling for his release, notably in France, where President Emmanuel Macron's office has asked Denmark not to extradite the activist, who has lived in France for the past year.
Prime Minister Mette Frederiksen has not yet commented on the case but Foreign Minister Lars Løkke Rasmussen said in an interview with newspaper Politiken earlier this week that it would be "difficult [for Denmark] not to" agree to the extradition request.
The issue nevertheless represents a thorny diplomatic dilemma in Copenhagen.
"This is not an easy case but I have to say that Denmark's position in regard to international conventions and things like that is that we play by the rules," he said.
Watson's lawyers on Thursday argued that he was innocent and demanded his immediate release.
They asked to present video evidence to the court of the 2010 incident, which they said showed the Japanese crew members were not on deck when the stink bomb was thrown.
But "the court refused to view the video evidence ... which shows that the Japanese have fabricated evidence," the head of Sea Shepherd France, Lamya Essemlali, who was present at the court hearing, told AFP.
She added that Watson had not been granted a translator during the hearing, which she said was a violation of Danish law.
"We find this scandalous. It's not normal, we didn't understand anything," she added.
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