Governor Schwarzenegger is praising the decision.
"The ruling is a victory for the children of California and for our future as a state."
The high court ordered a state appeals court to hold hearings in the case, but with schools ready to hold commencement ceremonies as soon as this weekend, a resolution appears unlikely.
Meantime state school’s chief Jack O’Connell says students who failed the test aren’t being left behind.
"They may attend summer school, adult education programs, independent study, on-line programs or do a 5th year in high school."
A group of students sued the state, claiming the test discriminates against low-income and minority students.