The court found complaints against plans by Prime Minister Yingluck Shinawatra's party to amend the constitution -- drawn up under the military junta that deposed her divisive brother Thaksin -- were unfounded.
"The Court dismisses all the petitions," said Nurak Marpraneet, one of eight judges at the Bangkok court, which had been flanked by security forces in anticipation of the ruling.
Opposition Democrats, swept from power in a landslide election win for Yingluck last year, alleged the efforts to amend the constitution signalled a threat to the deeply-revered royal family and Thailand's system of constitutional monarchy.
Nurak said their complaint was based on the "overconcern of the petitioner for the monarchy".
Hundreds of police officers surrounded the court building in the hours leading up to the decision as the country braced for a possible violent reaction to the verdict, but tensions dissipated with the decision.
Puea Thai spokesman Pormpong Nopparit told AFP his party was "adamant" it would continue with plans to amend the charter -- a key election pledge for the party.
The Democrats also accepted the ruling. "We are not going to create any conflicts or agitate anything," said party spokesman Chavanond Intarakomalyasut.
Political tensions in Thailand have spiralled since huge anti-Thaksin rallies by the royalist "Yellow Shirts" helped topple the tycoon in 2006.
The country has since been convulsed by sporadic and often violent protests culminating in two months of mass rallies by the pro-Thaksin "Red Shirts" in 2010, that left over 90 people dead and ended in a bloody army crackdown.
Thailand analyst Pavin Chachavalpongpun, of the Centre for Southeast Asian Studies at Japan's Kyoto University, said the kingdom might have escaped "imminent disaster", but said the court's ruling was "nothing to do with a long lasting solution to the Thai crisis".
"Don't forget that this is not the end of the constitutional amendment process, it has not even begun," he said.
Judicial rulings have played a key part in Thailand's volatile recent past, with two pro-Thaksin premiers forced from office in 2008 by the courts.
Their departure made way for the Democrats -- who have not won an election in two decades but are backed by the military and Bangkok elite -- to take power in a parliamentary vote.
Thailand expert Thitinan Pongsudhirak, of Chulalongkorn University in Bangkok, said he was "surprised by the leniency" of the ruling towards the ruling party.
"It suggests to me that the Red Shirt pressure did play some part and that the judges already knew that they didn't have very strong grounds -- using the future to decide on the present," he said.
Last month Yingluck's party was forced to postpone a parliamentary vote on controversial "reconciliation" proposals strongly opposed by opposition MPs, who fear they will be used to grant an amnesty to Thaksin, who lives abroad to avoid a jail term for corruption.
"This puts us back to square one. What happens to the bills? Do they proceed? If they do then we will have more brinkmanship," Thitinan said, adding there could be "more judicial activity" in the future.
Puea Thai's amendment plan currently consists of altering the part of the charter governing the process by which they can redraft the constitution. The court said the party will have to hold a referendum if it plans to overhaul the entire charter.