The ruling came after a case brought by the owner of two small bars, who claim that their business has been unfairly hit by the smoking ban.
Introduced in patchwork fashion across the country's 16 federal states earlier this year, Germany's smoking ban has been poorly received by often tobacco-friendly Germans, about a third of whom smoke.
The laws have often been ignored or barely enforced, with the owners of small bars and restaurants claiming that their businesses were threatened by the legislation.
Among them were the owners of two separate one-room pubs in Berlin and the south-western state Baden-Wuerttemberg.
They claimed that their bars small size prevented them cordoning off a smokers' area, as other bars have been allowed to, putting them at a competitive disadvantage. The constitutional court agreed.
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