The ruling, from U.S. District Judge Phyllis Hamilton, applies to the nation's 900 Planned Parenthood clinics and their doctors, who perform roughly half of all abortions in the United States.
In the 117-page decision, Hamilton said the Partial-Birth Abortion Ban Act is unconstitutional because it places an undue burden on women seeking abortions, its language is vague and it lacks an exception for procedures needed to protect a woman's health.
The decision is the first from three lawsuits filed immediately after President Bush signed the bill into law last year. Cases in Nebraska and New York are still pending.
Hamilton declined to issue an injunction in deference to the Nebraska and New York courts.
Planned Parenthood lawyer Beth Parker said the ruling sends a "strong message" to Attorney General John Ashcroft and the Bush administration "that the government should not be intruding on very sensitive and private medical decisions," the Associated Press reported.
She also said Planned Parenthood doctors may continue performing the procedure at clinics and hospitals not affiliated with the organization, according to Reuters.
The U.S. Attorney General's office for Northern California was not immediately available for comment, although legal experts expected that it would likely move quickly to appeal the decision.
When signing the bill into law in November, President Bush said "a terrible form of violence has been directed against children who are inches from birth while the law looked the other way."
In the banned procedure, known as intact dilation and extraction to doctors but called partial-birth abortion by its opponents, the living fetus is partially removed from the womb and its skull punctured or crushed, according to the AP.
Justice Department attorneys have argued that the procedure is inhumane, causes pain to the fetus and is never medically necessary.
Abortion proponents, however, contend that a woman's health during pregnancy is more important than how the fetus is terminated and that the banned method is often a safer solution than a conventional abortion in which the fetus is dismembered in the womb and removed in pieces.
The 2003 law is similar to a Nebraska law struck down by the Supreme Court in 2000 and Tuesday's decision did not come as a surprise to legal experts, according to The New York Times.