U.S. District Court Judge Anna Brown's decision says the procedures lack a meaningful mechanism for people to challenge their placement on the list.
Thirteen people challenged their placement on the list in 2010, including four military veterans.
Initially, Brown said she couldn't rule on the case. In 2012, the 9th U.S. Circuit Court of Appeals reversed that decision and sent the case back to her.
Brown said placement on the no-fly list turns routine travel into an "odyssey," and some of those on the list have been subjected to detention and interrogation by foreign authorities.
Brown had expressed skepticism at the government's arguments in several court hearings in 2013 and earlier this year. U.S. government attorneys cautioned the judge not to engage in "policymaking" were she to rule against them.
The ruling shows Brown heeded that caution. She did not create a new procedure for those on the list to challenge their placement. Instead, Brown said the Department of Homeland Security needs to find a way to disclose to those on the list the unclassified information used to place them there.
Since much of what is used for placement is classified, Brown said the government should provide people on the list the nature and extent of the classified information, the type of threat they pose to national security, and the ways in which they can respond to the charges.
The process "does not provide a meaningful mechanism for travelers who have been denied boarding to correct erroneous information in the government's terrorism databases," Brown ruled.
In January, a California woman successfully challenged her placement on the list, but the ruling did not address the broader constitutional implications.
U.S. Justice Department spokeswoman Dena Iverson said government attorneys were reviewing the decision and would have no comment Tuesday.
American Civil Liberties Union attorney Hina Shamsi said: "This should serve as wakeup call to the government."