The Supreme Constitutional Court's decision was in response to a lawsuit filed by an Egyptian expatriate holding a US passport, who had been prevented from standing for parliament due to his dual citizenship.
The ruling paves the way for citizens with dual nationality to run for the parliament.
Egyptian constitution explicitly states that candidates for presidency and their spouses should be Egyptian citizens only.
The decision came days after Supreme Constitutional Court ruled as unconstitutional a clause in the election laws, forcing the country's electoral body to put on hold the much-anticipated parliamentary polls from March 21 until the review of the ruling.
Egypt has been without its main parliament chamber since 2012 when it was dissolved by a court ruling.
The elections are the final step of a transitional roadmap outlined by the military in July 2013 after the ouster of President Mohammed Morsi.