The ruling states laws prohibiting the use of dagga and the possession, purchase and or cultivation of it in private homes and for personal consumption are inconsistent with the Constitution.
Deputy Chief Justice Raymond Zondo ruled that the right to privacy should not be limited to the home or private dwelling and should be extended to any private space.
In a unanimous judgment, the highest court in the land has upheld the Western Cape High Court's ruling that marijuana can be used at home. But several government ministries - the justice, police, health and trade - challenged the ruling.
Three cannabis users who had faced prosecution for using the drug brought the case, saying the ban "intrudes unjustifiably into their private spheres".
The order makes it clear that only cultivation of marijuana for private use should be allowed, ruling out commercial growth of the drug as has occurred in the USA state of California, for example. "It is valuable because we can make fuel for cars, bricks for houses and paper for books", said Prince, adding that the judgment would also ensure that people are free to practice their culture as Africans.
The official status for dagga is that it is now "decriminalised".
Marijuana advocates and members of South Africa's Rastafarian community went into wild jubilation after the judgment.
Several of the roughly 100 activists sang struggle-era anti-apartheid songs.
Use of cannabis and medicinal marijuana is gaining popularity in some parts of the world to ease suffering from cancer, glaucoma, HIV and AIDS, and other serious conditions.
But opponents fear crime connected to drug abuse and users graduating to harder drugs.
Globally, the legal status of cannabis varies widely.
Coca-Cola Company on Monday indicated that it was eyeing weed-infused drinks to expand its products list and increase market share.