The court ordered the government to seize the Brotherhood's funds and administer its frozen assets. The army-backed government is waging the toughest crackdown in decades on the group, which says it has a million members.
Security forces killed hundreds of its supporters and rounded up thousands more since Mursi was deposed by the army on July 3 after mass protests against his rule.
The Brotherhood won parliamentary and presidential elections after the former Egyptian dictator Hosni Mubarak was overthrown in 2011, but was outlawed for most of its 85 years in existence.
Army chief Abdel Fattah al-Sisi's toppling of Mursi triggered a political crisis in the Arab world's most populous state, with the Brotherhood insisting that a military coup robbed them of power.
The court decision is likely to drive more Brotherhood members underground and may encourage young Egyptians and Mursi followers to pour into the streets again.
Dozens of prominent Brotherhood figures, including its leader Mohammed Badie, have been detained allegedly for provoking violence and murder.
After Mursi’s downfall, many people staged rally against the ruling military leaders and called for Mursi reinstatement, but they were greeted by security forces’ fire .
"The court bans the activities of the Muslim Brotherhood organisation and its non-governmental organisation and all the activities that it participates in and any organisation derived from it," Mohammed al-Sayed, the presiding judge said.