The nine-member bench ruled by seven to two that the 1953 statute aimed at protecting traditional family values was unconstitutional.
"Even if adultery should be condemned as immoral, state power should not intervene in individuals' private lives," said presiding justice Park Han-Chul.
The decision saw shares in the South Korean firm Unidus Corp., one of the world's largest condom manufacturers, soar by the daily limit of 15 percent on the local stock exchange.
In the past six years, close to 5,500 people have been formerly arraigned on adultery charges -- including nearly 900 in 2014.
But the numbers had been falling, with cases that ended in prison terms increasingly rare.
Whereas 216 people were jailed under the law in 2004, that figure had dropped to 42 by 2008, and since then only 22 have found themselves behind bars, according to figures from the state prosecution office.
"Public conceptions of individuals' rights in their sexual lives have undergone changes," Park said, as he delivered the court's decision.
Reading the dissenting opinion, Justice Ahn Chang-Ho insisted the 1953 statute was a key protector of family morals, and warned that its abolition would "spark a surge in debauchery."
Under the law, adultery could only be prosecuted on complaint from an injured party, and any case was closed immediately if the plaintiff dropped the charge -- a common occurrence that often involved a financial settlement.
Such was the case in 2008 when one of the country's best-known actresses, Ok So-Ri, was given an eight-month suspended sentence for having an adulterous affair.
At that time, Ok unsuccessfully petitioned the Constitutional Court, arguing that the law amounted to a violation of her human rights in the name of revenge.
