They found that an extract of the herb, known technically as Hypericum perforatum, was as effective at easing the symptoms of depression as the commonly used drug imipramine.
Scientists from the University of Giessen in Germany, are recommending that the herb should be considered as a first line treatment for patients with mild to moderate depression.
Britons spend around £5m a year on St John's wort and an estimated two million people have tried it.
However, the use of the herb to treat depression has been controversial.
The Medicines Control Agency (MCA) in the UK issued a warning earlier this year advising that the herb should not be used by women taking the contraceptive pill and patients on HIV, depression and migraine treatments.
'Severe consequences'
This is because the herb is thought to interfere with the action of the these drugs.
The MCA also advised other patients to seek medical advice about using St John's wort.
These included people using warfarin and digoxin for blood clots, cylcosporin after heart transplants, and theophylline for severe asthma and chronic bronchitis.
At the time, Professor Alasdair Breckenridge, chairman of the Committee on Safety of Medicines, warned that taking St John's wort could have "severe consequences for some patients."
The new findings, published in the British Medical Journal, are based on the largest every study of St John's wort.
The researchers treated more than 300 patients in Germany with mild to moderate depression with either St John's wort extract or imipramine for six weeks.
Side effects
They found that the overall effect on depression was the same for the two groups.
However, patients seemed to tolerate St John's wort better than imipramine.
Nearly two-thirds (63%) of patients taking imipramine reported side effects such as dry mouth, sweating and dizziness.
This compared to just 39% of patients taking St John's wort.
As a result, only 3% of patients taking St John's wort stopped treatment compared to 16% of patients on imipramine.
Lead researcher Dr Helmut Woelk said the results provide "compelling evidence" that St John's wort extract is as effective as standard antidepressants.
Scientists at Cambridge University are working to develop a synthetic version of the popular herbal remedy St John's wort so that it does not affect other treatments.