The court, in a 5-4 ruling, barred the party from amending the Constitution to make the change from a partly appointed Senate, The New York Times reported.
The dispute stems from the 2006 coup that ousted Prime Minister Thaksin Shinawatra, a billionaire businessman. Thaksin remains in exile although his political allies are now in power and his sister, Yingluck Shinawatra, is prime minister.
After the coup, the military interim government appointed a committee that amended the Constitution. One of the changes was making some senators appointed.
Both houses of Parliament passed the amendment. It had not yet been signed by King Bhumibol Adulyadej.
Supot Kaimook, the judge who wrote the majority opinion, said it is important to democracy to protect minority rights.
"Thailand's democratic system allows the majority to set the standard," he said. "But once it uses its power arbitrarily and suppresses the minority without listening to reason, this makes the majority lose its legitimacy."