The decision is likely to affect millions of drivers and vehicles.
ADVERTISEMENTBig cities in Germany have been given the green light to ban heavily-polluting diesel cars.
The country's highest federal administrative court made the ruling on Tuesday morning, likely to be a major blow to Europe's largest car market.
The decision comes after German states had appealed against bans imposed by local courts in Stuttgart and Duesseldorf.
Those cases were brought by environmentalists concerned about poor air quality..
There has been a global backlash against diesel-engine cars since Volkswagen admitted in 2015 to cheating U.S. exhaust tests, meant to limit emissions of particulate matter and nitrogen oxide (NOx), known to cause respiratory disease.
While other countries are also considering restrictions on diesel cars, a ban in the birthplace of the modern automobile is a new blow for the car industry, and an embarrassment for Chancellor Angela Merkel's government, which opposes bans.
Merkel's government, which has come under fire for its close ties to the car industry, had lobbied against a ban, fearing it could anger millions of drivers and disrupt traffic in cities, with public transport not in a position to take up the slack.
Ugo Taddei, a clean air lawyer at NGO ClientEarth, said: “The win is a tremendous result for people’s health in Germany and may have an impact even further afield.
"This ruling gives long-awaited legal clarity that diesel restrictions are legally permissible and will unavoidably start a domino effect across the country, with implications for our other legal cases.
"Putting traffic restrictions on the most polluting vehicles is the quickest and most effective way to protect people from harmful air pollution.”