Lai, founder of the now-closed popular Chinese news tabloid Apple Daily, has been standing trial since February after he pleaded not guilty to "sedition" and "collusion" charges.
The charges were brought against Lai, 76, under a sweeping national security law Beijing imposed on the financial hub almost four years ago after widespread protests.
The prosecution accused Lai of using Apple Daily as a platform to incite Hong Kong residents to oppose the authorities and to appeal for foreign sanctions.
He could be sentenced to life in jail if convicted.
RSF said in a statement its Taipei-based advocacy officer Aleksandra Bielakowska was denied entry at Hong Kong's international airport.
She was travelling with RSF's Asia-Pacific bureau director Cedric Alviani "to meet journalists and monitor a hearing in the trial of Jimmy Lai", it said.
Bielakowska was "detained for six hours, searched and questioned... before being deported from the territory", the statement said, the first time an RSF representative had been denied entry or held on arrival in Hong Kong.
Hong Kong's Immigration Department declined to comment on "individual cases".
RSF representatives entered Hong Kong twice last year to observe Lai's case.
Rebecca Vincent, RSF's director of campaigns, said she was "appalled by this unacceptable treatment" and demanded an explanation from the Hong Kong government.
"We have never experienced such blatant efforts by authorities to evade scrutiny of court proceedings in any country, which further highlights the ludicrous nature of the case against Jimmy Lai, and the dire erosion of press freedom and the rule of law in Hong Kong," Vincent said in the statement.
Hong Kong's place on RSF's global press freedom index has fallen from 18th to 140th over the past two decades. The greatest decline came in 2022 after the implementation of the security law.
Hong Kong enacted a second, homegrown security law last month to punish five categories of crimes with penalties of up to life in jail: treason, insurrection, espionage, sabotage and external interference.
U.S. news outlet Radio Free Asia announced the closure of its Hong Kong office last month over "concerns about the safety of RFA staff and reporters" under the new law.
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