Muslim women have long argued that the law, which allows men to divorce their wives simply by uttering the word “talaq” three times, violates their right to equality.
They have been left destitute by husbands divorcing them through “triple talaq”, including by Skype and WhatsApp.
Three of the five judges hearing a case questioning the legality of the law ruled it was unconstitutional, effectively ending its legal practice.
The court’s verdict was marred by confusion initially, with the senior judge, the chief justice of India, announcing that his opinion was to suspend the practice and ask the government to come up with a new law within six months.
He was overruled by the three judges who said it was unconstitutional.
“Finally I feel free today. I have the order that will liberate many Muslim women,” Shayara Bano, one of the women who brought the case, told Reuters after the ruling.
Triple talaq is banned in several Muslim countries, including in neighbouring Pakistan and conservative Saudi Arabia.
Debate over the law has pitted an unlikely coalition of Muslim women, Prime Minister Narendra Modi and his ruling Hindu nationalist party which wanted the law quashed, against some Muslim groups which say the state has no right to interfere in religious matters.
Some fear that the Hindu majority is trying to counter Islamic influence in society.
India allows religious institutions to govern matters of personal law - marriage, divorce and property inheritance - through civil codes designed to protect the independence of religious communities, including of minority Muslims.