Bennie Hart says the point of the plate is to show the impossibility of disproving anyone's claim to being God.
But transport chiefs in the religiously conservative state ruled that it might distract other drivers and would be in bad taste.
Civil liberties campaigners have taken up Mr Hart's legal case.
He says he had the same number plate when he lived in the state of Ohio for 12 years without any problems.
"I simply want the same opportunity to select a personal message for my licence plate just as any other driver," said Mr Hart, who lives in Kenton County, northern Kentucky.
"There is nothing obscene or vulgar about my view that religious beliefs are subject to individual interpretation."
The American Civil Liberties Union of Kentucky (ACLU-KY) and the Freedom From Religion Foundation have filed a lawsuit on Mr Hart's behalf against state transportation secretary Greg Thomas on grounds of free speech.
ACLU-KY Legal Director William Sharp said that under the US First Amendment, government officials "do not have the authority to censor messages simply because they dislike them".
"And in this instance, personalised licence plates are a form of individual speech equally deserving of First Amendment protection," he said.
Kentucky transport authorities declined to comment on the case.
An American atheist is suing officials in the US state of Kentucky after he was refused a personalised car number plate which reads "IM GOD".