The decision cast doubt over Emanuel's candidacy just a month before the election. He had been considered the front-runner and had raised more money than any other candidate.
The court voted 2-1 to overturn a lower-court ruling that would have kept his name on the Feb. 22 ballot. Emanuel plans an appeal to the Illinois Supreme Court. Early voting had been set to begin on Jan. 31.
"I have no doubt that we will in the end prevail at this effort. This is just one turn in the road," Emanuel said, adding that the "people of the city of Chicago deserve the right to make the decision on who they want to be their next mayor."
Those challenging Emanuel's candidacy have argued that the Democrat does not meet the one-year residency requirement because he rented out his Chicago home and moved his family to Washington to work for President Barack Obama for nearly two years.
Emanuel has said he always intended to return to Chicago and was living in Washington only at the request of the president.
After he quit working for Obama, Emanuel moved back to Chicago in October to campaign full-time.
He is one of several candidates vying to replace Mayor Richard Daley, who is not seeking a seventh term.
Before yesterday's ruling, attorney Burt Odelson, who represents two voters objecting to Emanuel's candidacy, had had little luck trying to keep Emanuel off the ballot.
The Chicago Board of Election Commissioners and a Cook County judge have both ruled in favor of Emanuel, a former congressman, saying he didn't abandon his Chicago residency when he went to work at the White House.
Odelson had said he had planned to take the challenge to the state Supreme Court, if necessary.
"Have I stood down at all? No, I've been confident all along because that's the law. That's the way you read the law," Odelson told reporters.