The European Council, which placed Hamas on the terrorism list in 2001, "did not produce the obligatory judicial effects for the designation", the lower court asserted.
It found that the measures contested by Hamas and the LTTE were based not on facts examined and accepted in decisions adopted by the competent authorities (as required, according to the General Court, by the common position), but on information which the Council obtained from the press and the Internet.
The Council appealed to the Court of Justice and sought to have the two judgments of the General Court set aside.
Both decisions received rebukes from Israel, with Prime Minister Benjamin Netanyahu blasting the lower European Union court ruling as "staggering" and "hypocrisy", while the Foreign Ministry had said it expected the European Union to fix the situation.
The court, however, removed Sri Lanka's Liberation Tigers of Tamil Eelam (LTTE) from the 28-member bloc's terror list, BBC reported.
The European Union originally listed Hamas as a terror group more than a decade ago.
"One just needs to look at article seven of their charter to know their proudly stated genocidal aspiration to the mass murder of Jews all over the world".
The 2014 ruling noted, however, that it did not "imply any substantive assessment of the question of the classification of Hamas as a terrorist group".
For the last decade, Hamas has been the de facto government of Gaza, while the Fatah-led Palestinian Authority has controlled the West Bank.
Being on the list means that Hamas's assets in European Union member states are frozen, and travel bans are in place for members of the organisation.
The 1967 borders refer to those that existed before the war in which Israel occupied East Jerusalem, the West Bank and the Gaza Strip.
The EU maintains an active sanctions policy, targeting individuals, groups and states, including several other Palestinian entities.
Despite the EGC ruling, Hamas had been retained on the blacklist in anticipation of an appeal and to facilitate the freezing of assets should the decision be overturned.
Israeli authorities have now made a decision to replace the metal detectors with cameras and other security measures at the site known as the Haram al-Sharif by Muslims and Temple Mount by Jews.