The state's highest court has rejected a key part of Mayor Michael Bloomberg's homeless policy that would have required single adults to prove they have nowhere else to go before entering a shelter.
The Court of Appeals sided with lower courts, saying the Bloomberg administration failed to follow procedure and hold a hearing on the policy.
Under the requirement, single adults seeking a bed would have had to provide details on their recent history and finances.
The City Council filed a lawsuit against the policy in 2011, saying it would keep thousands of homeless people on the streets.
"We are extremely pleased with today’s decision, which prevents the Department of Homeless Services from implementing a policy that would have kept thousands of homeless men and women out of shelter," City Council Speaker Christine Quinn said in a statement.
"As the court rightly held, the mayor cannot unilaterally impose policies that would have such significant impact without even notifying the public or receiving comments," she said.
Mayor-elect Bill de Blasio has vowed to reform unfair eligibility rules for homeless shelters.