The 2013 law, which has been used to jail activists for up to two years, required demonstrators to inform the interior ministry that they were planning a protest.
The ministry could then refuse permission.
The Supreme Constitutional Court ruled that the article was unconstitutional, barrister Tareq Shibel said.
The court said in a statement that the constitution guaranteed freedom of association and the right to peaceful protest.
The authorities have deployed this law to prevent anti-government protests, but groups of people would be able to attend pro-authorities rallies during the same period.
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However, today's ruling does not mean the law will be scrapped in its entirety, said two court officials who did not be wish to be identified.
The verdict is "a partial victory that has granted us a political victory" against the government, Tareq al-Awady, one of the lawyers who challenged the law's constitutionality, told AFP.
"We were hoping the court would accept our appeal against the two articles that criminalise and set the punishment, so imprisoned young people could be freed," he said.
Following the verdict, "as long as the interior ministry is notified" about a protest it cannot ban it, Awady said.
A crackdown on Islamist supporters of Morsi after his ouster saw hundreds of demonstrators killed and thousands jailed, including secular dissidents.
Jihadist attacks have since killed hundreds of soldiers and policemen.
The United Nations and rights groups had asked the government to reconsider the protest law.
In October, Sisi said his government would look into revising the law, shortly after pardoning 82 detainees imprisoned on political grounds or over freedom of expression.