Several detained or former patients at Rampton hospital in Nottinghamshire argue the ban is a "disproportionate interference" with their rights.
Nottinghamshire NHS Healthcare Trust said patients were given help to quit, adding the policy applied to the entire hospital organisation.
Three individuals are seeking a judicial review at the High Court.
Basic freedoms
They argue that article 8 of the European Convention on Human Rights, which guarantees respect for private life, entrenches their right to smoke.
Their lawyers argue that the hospital is their home - and to prevent them smoking there when they are not free to go elsewhere to smoke interferes with their rights.
Smokers make up 26% of the general population, but 70% of mental health inpatients are smokers, according to Mental Health Today.
Marcus Brown of Cartwright King said it was a question of basic freedoms.
"You or I may not set so much store by being able to have a cigarette if we choose to or not. But when it is a such part of your life it has a really devastating effect on them to be told that this is something they are no longer able to do.
"They are being deprived of the choice of doing what they want," he said.
Dr Mike Harris, director of the trust's forensic services, said only three patients out of 370 patients were part of the case.
He said inmates were allowed to smoke in prison, but smoking was restricted by a smoke-free environment policy at Rampton.
The hearing is expected to last four days.
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