A Quebec court judge dismissed two petitions she filed and ruled Monday that Thibault is not entitled to royal immunity.
Thibault, who held the provincial vice-regal post between 1997 and 2007, is on trial after being charged with fraud and breach of trust in connection with more than $700,000 in alleged improper expenses.
The money was allegedly spent on gifts, trips, parties, meals and skiing and golf lessons.
The charges were laid after a joint report filed by former provincial auditor general Renaud Lachance and his federal counterpart at the time, Sheila Fraser.
Thibault's lawyers tried repeatedly to have the case tossed out by arguing that, as the highest representative of the Crown in Quebec, she could not be prosecuted by herself.
In his ruling, Judge Carol St-Cyr said that because all the evidence had not been heard during the trial, he could not grant Thibault's request to halt proceedings.
The judge also wrote that, according to constitutional law, the lieutenant-governor does not enjoy the same benefits as the Queen.
St-Cyr added that immunity applies only to actions that involve official state functions, not personal ones.
In her other petition, Thibault argued she was not a civil servant and could not therefore be charged with breaching the trust of the federal and Quebec governments.
But the judge concluded that Thibault was indeed a public servant because she was appointed to fill a public position.
St-Cyr pointed out that under the Constitution, the lieutenant-governor is a civil servant, adding such an affirmation is even posted on the lieutenant-governor's website.
The Supreme Court of Canada refused to hear Thibault's case in May 2013.
Thibault said Monday it was important for her to testify at the trial "so the truth can be known."
"I am 75 years old and...I don't want to leave behind the image of a woman who, after having given everything, tainted an institution as important as that of the lieutenant-governor," she told reporters at the Quebec City courthouse.
"I can say that I've been honest all my life...all my life."
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