The unanimous ruling caps months of political turmoil that have overshadowed efforts to deal with the administration of United States President Donald Trump at a time of slowing growth in Asia's fourth-largest economy.

The decision now sets in motion a race to elect the next president within 60 days as required by the constitution. Prime Minister Han Duck-soo will stay on as acting president until a new leader is sworn in.

Lee Jae-myung, the populist leader of the liberal Democratic Party who had lost to Yoon by a razor-thin margin in 2022, is a clear front-runner but faces legal challenges of his own under multiple trials for corruption.

The conservatives have a wide-open field of candidates.

"The Constitutional Court’s unanimous ruling has removed a major source of uncertainty," said Professor Leif-Eric Easley of Ewha University in Seoul, noting how the next government would have to navigate challenges including North Korea’s military threats, China’s diplomatic pressure and Trump’s trade tariffs.

Acting Chief Justice Moon Hyung-bae said Yoon violated his duty as president with his December 3 martial law declaration, acting beyond his constitutional powers with actions that were "a serious challenge to democracy".

"[Yoon] committed a grave betrayal of the people's trust," Moon said, adding that Yoon's declaration of martial law created chaos in all areas of society, the economy and foreign policy.

Human Rights Watch called the ruling a win for the country's resilience, quest for human rights and democratic values.

Thousands of people at a rally calling for Yoon's ouster, including hundreds who had camped out overnight, erupted into wild cheers on hearing the ruling, chanting "We won!"

"This took a long time but it's fortunate that it is a sensible outcome," said Kim Han-sol, a 23-year-old student at a rally who watched the ruling outside the court.

Supporters of Yoon who were gathered near his official residence watched the ruling on a big screen in stunned silence. Some reacted in anger, with one protester arrested for smashing a police bus window, the Yonhap news agency reported. Others held their heads in their hands and wept.

The South Korean won was largely unfazed by Friday's ruling, remaining about 1 percent higher versus the dollar, while the benchmark KOSPI stock index fell 0.9 percent.

In a message released through his lawyers, Yoon apologized to South Koreans.

"I am so sorry and regretful that I wasn't able to live up to your expectations."

Earlier, Yoon's lawyers had slammed the court's ruling.

"This can only be seen as a political decision and it's really disappointing," Yoon Kab-keun told reporters. Yoon has been holed up in his official residence since his release from jail on March 8.

The court rejected most of Yoon's argument that he declared martial law to sound the alarm over the main opposition party's abuse of its parliamentary majority, saying there were legal avenues to address disagreements.

Mobilizing the military against parliament to disrupt its functions was a grave violation of Yoon's constitutional duty to safeguard the independence of the three branches of government, Moon said.

The presidential flag that flew alongside the national flag at the presidential office was lowered on Friday after the ruling. At military bases and command centers around the country, portraits of Yoon will be taken down to be shredded or burned, according to law.

Kwon Young-se, the interim leader of Yoon's ruling People Power Party, pledged to work with the acting president to stabilize the country. Acting President Han, speaking after the ruling, said he would do all he could to ensure an orderly election.

Shoring up growth and formulating a response to a 25 percent tariff imposed by the United States on South Korean imports are urgent priorities for the government.

The finance ministry has proposed a 10 trillion won (US$7 billion) supplementary budget but needs to seek a compromise with the opposition Democratic Party whose leader Lee is targeting 30 trillion won.

The 64-year-old Yoon still faces a criminal trial on insurrection charges related to the martial law declaration which carries a maximum sentence of death or life imprisonment.

The embattled leader became the first sitting South Korean president to be arrested on Jan. 15 but was released in March after a court cancelled his arrest warrant. Oral arguments in the case start on April 14.

The crisis was triggered by Yoon's surprise late-night declaration that martial law was needed in part to root out "anti-state" elements.

Yoon lifted the decree six hours later after parliamentary staffers used barricades and fire extinguishers to ward off special operations soldiers who arrived by helicopter and broke windows as they sought to enter parliament, where lawmakers voted to reject martial law.