Independent portal Malaysiakini has over the past decade become a leading source of information in the Southeast Asian nation, where major newspapers and broadcasters are largely government-linked.
Kuala Lumpur High Court ruled the government had not acted within its power and its refusal to grant Malaysiakini a printing permit was "unreasonable", said Edmund Bon, who represented the online portal.
"It's a landmark case; it's historic," Bon told AFP.
"It will open the floodgates because the court has recognised that the granting of a permit is a right, not a privilege as the Government has said."
Government lawyers could not immediately be reached for comment.
They can appeal Monday's ruling.
All newspapers in Malaysia need a permit to print, allowing the government to control them and putting publishers under pressure to toe the line.
Malaysiakini and other online media have remained relatively free - despite occasional raids, bans and government criticism - due to an official pledge not to censor the Internet, made in the mid-90s to attract foreign investment.
Premesh Chandran, co-founder and Chief Executive Officer of Malaysiakini, said he was "happy" with the court's ruling.
Malaysiakini launched the legal challenge two years ago after authorities rejected its application.
"The court recognised publishing a paper is part of freedom of expression, which is a right under the constitution.
This is a fundamental shift of the interpretation of freedom of speech in the country," he told AFP.
He said Malaysiakini, which has about 2.5 million readers a month, wanted a newspaper to complement its online content and reach a wider audience.
Prime Minister Najib Razak, touting a reform agenda, recently relaxed the printing permit rules, saying papers no longer had to renew their licenses annually.
But the government still has the power to revoke permits.
Elections are due by middle of next year.