The UK's 11 most senior judges have voted, 8-3, forcing the government to seek parliamentary approval before formally initiating the process to leave the EU.
The ruling is a blow for the British Prime Minister, Theresa May, who plans to trigger Article 50 by the end of March.
UKIP Leader Paul Nuttall, whose anti-EU party led the Brexit campaign in June last year, says the ruling is a minor setback.
"I think it's what we expected, I think we've lost the battle today and I'm disappointed but not surprised, but we will win the war. And now the House of Commons and the House of Lords have a duty to enact the will of the people and I want to make it clear what that will is. People voted en masse on June 23 to leave the EU. They also voted to leave the single market. The Prime Minister of the day, David Cameron, the Chancellor, the Foreign Secretary of the day, Philip Hammond, they all made it clear: leaving the EU means leaving the single market. The British people went out and did that by a score of 52 per cent. So leaving must mean leaving."
Last week, the British PM outlined a12-point-plan on what the terms the UK would be seeking.
One of the key components of her plan - leaving the single market - has been criticised by MPs who hoped to leave the bloc but keep trading privileges with it.
Brexit supporters are now concerned the Supreme Court ruling will give politicians opposing her plan a chance to soften the terms.
Brexit minister David Davis has warned MPs not to overrule the electorate.
"The purpose of this bill is simply to give the Government the power to invoke Article 50 and begin the process of leaving the European Union. That is what the British people voted for and that is what they would expect. Parliament will rightly scrutinise and debate this legislation, but I trust no-one will seek to make it a vehicle for attempts to thwart the will of the people or frustrate or delay the process of leaving the European Union."
Mr Davis says a bill will be introduced to parliament within days.
Opposition Labour Leader Jeremy Corbyn says MPs have a duty to examine and debate the Brexit plan regardless of the government's timetable.
"We have been making the point ever since the referendum that parliament must be involved. We must be able to hold the government to account, that's what parliament exists for, to hold them to account to make sure that the negotiations actually are to the benefit of all of the people of this country however they voted in the referendum. We are going to hold them to account to protect jobs, we are going to hold them to account to make sure British industry does have market access, we are not going to allow ourselves to become some kind of offshore tax haven; that's not what people voted for."
The Scottish National Party (SNP), which has 54 MPs, has vowed to offer up to 50 serious and substantive amendments to the proposed Brexit plan.
Scottish First Minister, Nicola Sturgeon, says they have to try and get the best deal for Scotland.
"Scotland voted against Brexit and therefore I think it is inconceivable that SNP MPs would vote to trigger Article 50. But I think it's important that the House of Commons and parliament is involved: not just in that narrow question of whether to trigger Article 50 but also the terms of the negotiation. The PM set out last week the path towards the hardest of hard Brexits. I don't believe there is a majority for that in the House of Commons, I certainly don't believe there is a majority for that across the country."
Some investors hope politicians will force Ms May to seek a deal which prioritises access to the European single market.
British businessman Charlie Mullins helped fund the Supreme Court challenge.
He says there must be a vigorous debate over the plan before Ms May meets EU leaders to negotiate.
"She was saying, 'oh, they can vote on this once she's negotiated a deal' - well that's all to o late then. Once she's negotiated a deal, once we've left the EU and we're offered the deal we've got, there is no point in parliament getting involved. They need to be involved before we leave. And now I think they can put enough pressure on to her to make sure we get a soft Brexit."
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