The ruling is likely to hamper Turkey's efforts to join the European Union, which had warned Ankara that banning the party would violate Kurdish rights.
Turkey's Kurdish population, whose language was outlawed for years, has long complained of discrimination.
But Hasim Kilic, the constitutional court chairman, said the party's closure "was decided due to its connections with the terror organisation and because it became a focal point of the activities against the country's integrity".
The ruling comes after weeks of clashes between police and protesters angry at the the prison treatment of Abdullah Ocalan, the founder of the PKK.
Earlier this week a protester was shot dead as 15,000 pro-Kurdish protesters marched in the city of Diyarbakir.
Anita McNaught, Al Jazeera's correspondent in Turkey, said there are fears the ruling will lead to more violence.
"We've seen an escalation of street protests, we're now seeing fatalities ... and this will be seen by many Kurds as provocation, they will not take this well," she said.
The DTP was founded in 2005 as a successor to several Kurdish parties that were forced to wind up for collaborating with the PKK.
The PKK is listed as a terrorist group by Turkey and much of the international community.
The party says it has "no organic links" with the separatists, but insists the group should be considered an interlocutor in efforts to resolve the Kurdish conflict.
Cengiz Aktar, a columnist with the Turkish Hurriyet Daily News, said there are "some links" between the DTP and the PKK but criticised Turkey for making party closures "a habit".
"The links apparently are there, according to the constitutional court. But in modern democracy, party closures are very seldom," he told Al Jazeera.
"This one really comes at a very unfortunate moment when the country was making a very important opening towards its Kurdish minority.
"It's a totally new era and suddenly comes this unacceptable decision that may overturn the whole democratisation process and bring the country to the verge of chaos."