People have been allowed to leave the gender box blank since 2013, but advocates have fought for an "intersex" option after a girl brought the issue to court.
However, the Federal Constitutional Court said Germany's Basic Law, or constitution, protected the personality rights of individuals who do not define themselves as male or female, adding that the current law on civil status interfered with that right. In a landmark ruling, the court said that an intersex person, who is neither male nor female, is entitled to register their gender as such.
Though intersex people are already recognized on official documents in Australia, India, New Zealand, Nepal and the USA - where the first intersex birth certificate was issued past year - this decision makes Germany the first in Europe.
It would make Germany the first European country to offer intersex people the choice of identifying as neither male nor female.
The judges ruled that the law doesn't define gender as binary, so the government can not force citizens to leave the form blank.
The new legislation must be in force by December 31, 2018, the court said.
"Research suggests, however, that in a few births per thousand some individuals will be born with a single sex chromosome (45X or 45Y) (sex monosomies) and some with three or more sex chromosomes (47XXX, 47XYY or 47XXY, etc.) (sex polysomies)", the World Health Organization explained, adding that other intersex cases involve 46XY individuals being born female due to a mutation on the Y-chromosome.
The Federal Constitutional Court wants birth certificates by the end of next year to allow for the option.
A German government spokesperson said the government would comply with the ruling. "An intersex person may be straight, gay, lesbian, bisexual or asexual, and may identify as female, male, both or neither".
The United Nations' Human Rights Office of the High Commissioner says according to experts between 0.5 percent and 1.7 percent of the global population is born with intersex traits that do not fit male or female bodies, including genitals, gonads and chromosome patterns. The Australia, New Zealand, Nepal, and India already do, and as of October, the USA state of California.