Egypt's Emergency State Security Court on Monday overturned an earlier decision to list Hamas as a terrorist organization, the Ma’an news agency reported.
The court ruled that determining whether or not Hamas is a terror group does not fall under its jurisdiction.
The same court had decided in March 2014 to ban Hamas activities in Egypt and ordered the movement's assets to be seized.
At the time, Egyptian lawyer Samir Sabri filed a lawsuit against Hamas, saying it was behind attacks in the Sinai Peninsula and that Hamas leader Khaled Mashaal had planned them.
Hamas has denied any involvement in any attacks in Egypt, as has the Muslim Brotherhood, which was also blacklisted by Egypt as a terror group in 2014.
While the government of former Islamist president Mohammed Morsi was friendly with Hamas, the military-led government that ousted him has cracked down on the group, which it accuses of an attack on Egyptian police headquarters, and of planning church bombings in Sinai.
Most recently, Egypt accused Hamas of providing the weapons used by terrorists for two lethal attacks in El-Arish in October, in which dozens of soldiers were killed.
Egypt declared a state of emergency in the Sinai following that attack and began to create a buffer zone along the border with Gaza.
Most of the attacks in the restive Sinai Peninsula have been claimed by Ansar Bayt al-Maqdis, a group that has pledged allegiance to the Islamic State (ISIS).