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 per cent on the local stock exchange.
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.
It was the fifth time the apex court had considered the constitutional legality of the legislation which had made South Korea one of the few non-Muslim countries to regard marital infidelity as a criminal act.
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.
The downward trend was partly a reflection of changing societal trends in a country where rapid modernization has frequently clashed with traditionally conservative norms.
"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.
The debate over its future had simmered away for years, bubbling over from time to time especially if a public figure fell foul of the statute.
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.
The court had previously deliberated the issue in 1990, 1993 and 2001, but those moves to strike down the law had failed to gain the support of the six judges required.
Ok's 2008 petition had come close with five judges deeming the statute unconstitutional.
The law was originally designed to protect the rights of women at a time when marriage afforded them few legal rights, with most having no independent income and divorce carrying enormous social stigma.
But even socially conservative civic groups who had supported the legislation in the past acknowledged that times had changed.
"Adultery must be censured morally and socially, but such a law is inappropriate in a modern society," said Ko Seon-Ju, an activist with the Seoul-based civic group Healthy Families.
"It used to be an effective legal tool to protect female rights, but equal rights legislation has improved," Ko said.
"Adultery is an issue that should be dealt with through dialogue between the partners, not by law," she added.
While the adultery law may have been ruled out of existence, social disapproval of marital infidelity remains potent.
In April last year, South Korea blocked the newly launched Korean version of the global adultery hook-up site Ashley Madison, saying it threatened family values.
Yoo Hye-Jung, a 23-year-old college student, suggested that people unable to report adulterous spouses to the police might now resort to more violent methods of exacting revenge.
"If the law doesn't punish adultery and I can't act on my feelings of betrayal, I might take the law into my own hands," Yoo said.
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