By Lawrence Hurley

WASHINGTON (Reuters) - The U.S. Supreme Court on Thursday upheld the consideration of race in college admissions, rejecting a white woman's challenge to a University of Texas program designed to boost the enrollment of minority students.

The court, in a 4-3 ruling written by Justice Anthony Kennedy, decided in favor of the university and turned aside the conservative challenge to a policy intended to foster racial and ethnic diversity on campus.

The ruling ended an eight-year legal challenge to the affirmative action admissions system used by the University of Texas at Austin brought by Abigail Fisher, who was denied a place in 2008.

Affirmative action is a policy under which racial minorities historically subject to discrimination are given certain preferences in education and employment. Instead of a retreat on affirmative action that Fisher and her conservative backers had sought, the court endorsed race-based admissions for diversity.

Fisher said the university denied her admission in favor of lesser-qualified black and Hispanic applicants in violation of the U.S. Constitution's guarantee of equal protection under the law.

Kennedy, a conservative who has previously voted against university affirmative action, was joined by three of the court's liberals in the ruling. He said that "it remains an enduring challenge to our nation's education system to reconcile the pursuit of diversity with the constitutional promise of equal treatment and dignity."

In the Texas case, the challengers had failed to show that the university could have met its needs with another process, he said. Kennedy noted that the school "tried and failed to increase diversity" through other race-neutral means.

University officials contend that having a sizable number of minorities enrolled exposes students to varied perspectives and enhances the educational experience for all students.

The justices upheld a 2014 ruling by the New Orleans-based 5th U.S. Circuit Court of Appeals that had endorsed the school's "limited use of race in its search for holistic diversity."

President Barack Obama's administration backed the university in the dispute.

"I'm pleased that the Supreme Court upheld the basic notion that diversity is an important value in our society and that this country should provide a high-quality education to all our young people regardless of their background," Obama said at the White House.

"We are not a country that guarantees equal outcomes, but we do strive to provide an equal shot to everybody," Obama added.

Civil rights groups hailed the ruling, saying such programs provide a foundation for achieving equality throughout U.S. society. Conservatives said the ruling endorsed discrimination based on race.

The university admits most freshmen through a program that guarantees a place to students in the top 10 percent of their Texas high school graduating classes. It uses other factors including race to admit the remainder. Fisher was not in the top 10 percent of her high school class, and the university disputed whether she would have gained entry under any circumstance.

The justices had considered Fisher's case in June 2013. But rather than rule on the program's constitutionality then, they ordered the appeals court to scrutinize the Texas policy more closely.

'THE WIDER WORLD'

The university's president, Gregory Fenves, praised the decision and said race continues to matter in American life.

"We must make sure all of our students are able to excel in the wider world when they leave campus - educating them in an environment as diverse as the United States is one of the most effective ways to do so," Fenves said.

Writing in dissent, Justice Samuel Alito described the university's program as "affirmative action gone wild" because of the way it can benefit minorities from wealthy backgrounds. He said that while the university’s stated goals are laudable, “they are not concrete or precise, and they offer no limiting principle for the use of racial preferences."

Joining Alito in dissent were Chief Justice John Roberts and Justice Clarence Thomas.

Justice Elena Kagan, who was U.S. solicitor general in the Obama administration when it backed the university in lower-court litigation, took no part in the decision.

Fisher, now 26, graduated from her second-choice college, Louisiana State University, and now works as a financial analyst in Austin.

"I am disappointed that the Supreme Court has ruled that students applying to the University of Texas can be treated differently because of their race or ethnicity. I hope that the nation will one day move beyond affirmative action," Fisher said in a statement.

Edward Blum, a conservative activist who engineered Fisher's challenge, said racial classifications and preferences are among the most polarizing policies in America today.

"As long as universities like the University of Texas continue to treat applicants differently by race and ethnicity, the social fabric that holds us together as a nation will be weakened," added Blum, president of the Project on Fair Representation.

Blum has separately challenged the 1978 Supreme Court precedent that first allowed affirmative action, with new lawsuits against Harvard and the University of North Carolina.

(Reporting by Lawrence Hurley; Additional reporting by Jon Herskovitz in Austin, Texas; Editing by Will Dunham)