The General Court of the European Union ruled that the decision to include it was based on media reports and not on considered analysis.
The decision came as the European Parliament also adopted a resolution which supported Palestinian statehood in principle.
The European Parliament adopted the resolution to support Palestinian statehood in a compromise motion that did not go as far as some European countries would have liked.
Following negotiations between the main parties, the motion supporting the principle of a two-state solution to the Israeli-Palestinian conflict was carried by 498 votes to 88.
European Foreign Policy spokesperson Maja Kocijancic said the ruling was based on procedural grounds, and should not be seen as a political decision by the 28-member European Union.
"We have taken note of this judgement and, of course, we respect the judgement of the Court. But this legal ruling is clearly based on procedural grounds. It does not imply any assessment by the Court of the substantive reasons for the designation of Hamas. It is a legal ruling of the Court - not a political decision taken by the EU governments."
The resolution followed similar motions passed by parliaments in Sweden, Britain, France and Ireland that indicated growing European impatience with Israel and the stalled peace process.
However, in its ruling, the EU's second highest tribunal said member states could maintain their freeze on Hamas' assets for three months to allow time for further review or for an appeal to be launched.
Hamas' military wing was added to the EU's first-ever terrorism blacklist in December 2001 in the wake of the September-11 attacks in the United States.
Deputy Hamas Chief, Moussa Abu Marzouk welcomed the Court's decision. He said it proved the organisation was a legitimate resistance movement.
"The decision is a correction of a historical mistake the European Union had taken when they listed Hamas movement on the terror list. Hamas is a movement of resistance and it has a natural right according to all international laws and standards to resist the occupation. The international community should help it (Hamas) resist the occupation and not the opposite."
Hamas' founding charter called for the destruction of Israel and the group had regularly been in conflict with Israel.
Many Western countries, had sided with Israel in declaring Hamas a terror organisation, pointing to years of rocket strikes launched from Gaza and waves of suicide attacks, mostly between 1993 and 2005.
Australia had also listed the militant wing of Hamas on its terrorist group list.
Israel, which has clashed repeatedly with Europe in recent years over Palestinian statehood ambitions, demanded Hamas remain blacklisted.
Israeli Prime Minister, Benjamin Netanyahu said the European court ruling showed hypocrisy towards Israel.
"Today we witnessed staggering examples of European hypocrisy. In Geneva they call for the investigation of Israel for war crimes. While in Luxembourg, the European court removed Hamas from the list of terrorist organisations. Hamas that is committed countless war crimes and countless terror acts.
Mr Netanyahu said in making the decisions Europe had learned nothing from the atrocities of World War II.
"It seems that too many in Europe, on whose soil six million Jews were slaughtered, have learned nothing. But we in Israel, we've learned. We will continue to defend our people and our state, against the forces of terror, tyranny and hypocrisy."
