The high court in India's financial capital, Mumbai (Bombay), has lifted a ban on dance bars, imposed last year by the state government.
In the Mumbai bars, women danced and clients threw money
The court ruled that the ban was discriminatory and violated the right to equality.
The court ruling has been welcomed by the city's out-of-work dancing girls.
But the BBC's Zubair Ahmed in Mumbai says the ruling is being seen as a big setback for the government.
The government had said the bars were breeding grounds for crime and prostitution.
The ban had affected more than 100,000 women who worked in some 1,400 bars across the state of Maharashtra, of which Mumbai is the capital.
More than half of them had become jobless overnight and many were forced into prostitution to survive.
Following the court ruling, the bars can apply for licenses again.
The state government has been given eight weeks to appeal against the judgment in the Supreme Court.
Bar owners and dance girls had bitterly protested against the ban, saying that the government was playing with their lives.
They were particularly critical of Maharashtra Deputy Chief Minister, RR Patil, who was instrumental in banning the bars.
Mr Patil had argued that the bars had become a den of prostitution and that they were "a bad influence on young men".
The fully-clothed girls would dance to the tune of Bollywood numbers and clients often threw them money.