Tens of thousands of demonstrators had rallied weekly against the government reforms.
Israel's top court ruled Monday against a key component of the government's controversial legal overhaul, which challenged the powers of the judiciary and sparked mass protests.
A Supreme Court statement said eight of 15 justices had ruled against an amendment passed by parliament in July which scraps the "reasonableness" clause, used by the court to overturn government decisions which are deemed unconstitutional.
"This is due to the severe and unprecedented damage to the basic characteristics of the State of Israel as a democratic state," the statement said.
Prime Minister Benjamin Netanyahu had argued the sweeping judicial reform package presented a year ago was necessary to rebalance powers between judges and politicians.
But his detractors warn the multi-pronged package paved the way for authoritarian rule and could be used by Netanyahu to quash possible convictions against him, an accusation the premier denies.
Tens of thousands of demonstrators had rallied weekly against the government reforms, with protests only ending due to the outbreak of the Israel-Hamas war in October.
The "reasonableness" amendment, the only major part of the legal reform package to become law, was also one its most contentious steps as it sought to curb judicial oversight of the government.
When Netanyahu's allies voted to scrap the reasonableness clause in July, opposition lawmakers stormed out of the chamber, shouting "shame".
The law has been cited in only a handful of court decisions, including a high-profile ruling last year which barred a Netanyahu ally from serving in the cabinet because of a previous tax evasion conviction.
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