The Higher Administrative Court also ordered that all property and assets of the former ruling party be confiscated and handed over to the government.
The verdict met a major demand of pro-democracy activists in the country who had taken to streets in January this year to demand an end to the autocratic rule of Mubarak.
The latest victory for the Egyptian activists came days after Mubarak and his sons were put under detention for a probe into allegations of corruption and killing of protesters.
"The administrative court issued a ruling to dissolve the NDP and seize its money, and its headquarters and buildings will be handed to the government," a judicial source was quoted as saying by Al Jazeera.
While many of the party's senior executives are under investigation for corruption, the outfit had been trying to survive the popular revolt that toppled Mubarak in February.
After the January 25 revolution, the party was accused of being a platform for counter-revolutionary activities organised by its wealthy businessmen affiliates.
The NDP had dominated Egyptian political landscape since 1978 when it was constituted by Mubarak's predecessor, Anwar el-Sadat, and has changed its name a number of times.
The party won repeated re-elections in the country that were often considered rigged by the people.
In efforts to rebrand the party after the revolution, Talat el-Sadat, an outspoken opposition figure and nephew of Anwar el-Sadat, was appointed as the new secretary-general.
Some members of the party had hoped to contest the upcoming parliamentary elections, arguing they had cut ties with corrupt officials.
The verdict came as a surprise for the party's new head el-Sadat, who was an opposition parliamentarian during Mubarak's rule.
The party had already announced it was working on a programme for the next parliamentary elections scheduled for September, despite its leading figures, including former president Mubarak and head of the party's policies committee Jamal Mubarak, being detained and interrogated on charges of attacking protestors.
The court verdict came in response to a lawyers' petition, demanding the party's dissolution, accusing it of corruption.
Ahmed Ezz, a prominent businessman and the secretary for NDP's organisational affairs, was detained following Mubarak's ouster from power.