The Paris administrative court scrapped the rent controls just weeks after a similar decision was taken in the northern city of Lille, where caps had also been introduced.
Essentially the judge scrapped the regulation that banned landlords from setting rent prices more than 20 percent higher than the designated reference price for the neighbourhood when renting a flat for the first time or renewing a lease.
The court's ruling was not because it disagreed with the initiative in general but the geographical area to which it was applied. Judges believed it should be applied to the whole of the Paris region, in other words the 412 towns and suburbs on the other side of the périphérique ring road - and not just the capital itself.
One of the impacts of the rent controls in Paris was that prices started to rise in the in the area immediately outside the city known as the "Petite Couronne". The rent controls were due to be rolled out to the greater Paris region in 2018 in a bid to remedy the soaring prices. In the meantime officials were gathering data to help them calculate the reference rent prices in these towns.
Paris City Hall denounced the "very bad news that risks push rent prices up" and called on the government to act. The government has announced it will appeal the decision.
Paris's housing chief Ian Brossat said: "We hope that the government, by a suspensive appeal, will continue to allow us to apply this device that has stabilized rent prices after a surge in the last ten years" .
Julien Bayou head of the housing association Bail a Part said: "On the grounds that the rents have not been controlled throughout the Paris agglomeration they have decided to get rid of what was working well in Paris."
Bayou said the court's decision was "a disaster that is down to the remorselessness of estate agents and large real estate owners who wanted to kill a measure that works well and protects tenants from the most abusive rents".
However the UNPI, the federation of real estate owners hailed the decision "which rightly cancels an incomprehensible and inefficient regulation".
Since August 2015, Parisian landlords have had to play along with the rent-capping law - known as the Loi Alur (or Loi Duflot as it was originally called) - which was rolled out as a part of a sweeping housing reform by the former government.
It came as part of a bid to control rental prices in the capital, which have spiraled upwards by 42 percent over the last ten years.
The reform meant Paris rent prices were measured in euros per square metre and based on the building's age and location.
Under the rules no new rental contract could charge more than 20 percent per square metre above the neighborhood's median rent, which is assessed annually by a "local rent observatory".
They were due to be rolled out to other neighbourhoods around the capital in 2018, but the decision on whether to implement the caps was left to each local authority.
But despite the regulation, housing associations found that many Paris landlords were still charging too much rent for their flats.
The figures courtesy of the CLCV housing association, which looked at 800 online apartment ads, have revealed that many landlords and even agencies are still advertising their properties at illegally high rent prices.
The association launched a site called "My rent is too high" (Mon loyer trop cher) where renters from all cities can check in to see if they're being ripped off.