Hani al-Sibai's wife and children will be allowed to stay in the UK after an order from Home Secretary Theresa May blocking the family's citizenship was overturned.
The family will now continue to live with the Egyptian-born cleric at their home in west London, in the same neighbourhood where Mohammed Emwazi, better known as Jihadi John, once lived.
In his ruling over the family's citizenship, Justice Ouseley accepted that al-Sibai "no longer engages in extremist activities, albeit still holding to his views," the Telegraph reported.
Al-Sibai, 54, has appeared on UN terror sanctions lists and is said to have strong links to al Qaeda. He is believed to have influenced and radicalised a number of young men, including Jihadi John.
He and his family have lived in the UK since coming here in 1994. Successive UK governments have tried to deport al-Sibai for almost 20 years but the latest High Court ruling will now make it almost impossible to deport him.
Jihadi John, a Kuwait-born British citizen, was killed in a US drone strike in Syria in November. He was "evaporated" by a Hellfire missile fired from a US Reaper drone after British intelligence analysts located him in IS headquarters of Raqqa.