The army radio reported the strikes should be examined on a case-by-case basis.
The three-judge panel ruled unanimously on Thursday that "it cannot be determined in advance that every targeted killing is prohibited according to customary international law," while also noting that the tactic was not necessarily legal in every case.
The ruling gave legal legitimacy to a practice Israeli forces have routinely used against members of the Palestinian factions during the past six years.
Güncelleme Tarihi: 20 Eylül 2018, 18:16
The Israeli human rights organisation B'tselem estimated that 339 Palestinians were killed in the targeted operations over the past six years.
Of those, 210 were the targets and the rest were bystanders.
Two human rights groups, the Public Committee Against Torture in Israel and the Palestinian Society for the Protection of Human Rights and the Environment petitioned the court to ban the policy in 2002, but the court repeatedly delayed issuing a decision.
The Israeli military began carrying out targeted killings of Palestinian figures after the breakdown of the Israeli-Palestinian peace process and the subsequent outbreak of violence in the autumn of 2000, arguing that the tactic was the most effective way to stop Palestinian bombers attacking Israeli population centres.