"The High Court said a government ban on non-Muslims using the word was unconstitutional.Of course this does not mean that Christian and Islamic understandings of God are compatible, simply that it is not inconsistent or wrong for Arab Christians to refer to God as 'Allah'. In the Christian revelation he has revealed himself fully and finally in Yeshua (Hebrew), Isa (Arabic) or Jesus (Hebrews 1:1-4).
The court was ruling on a lawsuit filed by the Herald, a publication of the Catholic Church in Malaysia, in 2007.
The authorities had insisted that Allah was an Islamic word which could only be used by Muslims.
The BBC's Jennifer Pak in Kuala Lumpur said some Muslim groups suspect the Catholic Church is seeking to encourage Muslims to convert to Christianity - a move which is illegal in Malaysia.
'Glorious new year'
The issue had become a symbol of a growing number of religious grievances among minority groups, in a political environment often divided along racial and religious lines, our correspondent adds.
The Herald filed for a judicial review after it was temporarily ordered to stop publishing in 2007 for referring to "Allah".
The publication said it had been been using the word for decades, and had a constitutional right to do so.
The Herald welcomed Thursday's ruling, saying it would be a "glorious new year for some 850,000 Catholics in Malaysia".
More than half of Malaysia's population is Muslim but the large Chinese and Indian communities are mainly Christian, Buddhist or Hindu.