In a 6-3 ruling, the court's conservative majority rejected a challenge by Democratic Federal Trade Commissioner Rebecca Slaughter, ruling that Trump had the power to fire "subordinates who exercise the President's power."
The decision is expected to have wide-ranging implications, with Trump having aggressively sought to expand executive powers as he works to transform the US government and put political allies in key positions.
Trump hailed the verdict in a social media post, saying it expanded presidential power "at a time when it is most needed."
"It is such an Honor to be the sitting President who won this Historic and Unprecedented Ruling, one of the most important ever given with respect to Presidential Powers," he said.
Slaughter was dismissed without cause and lower courts upheld her claim that the move violated rules Congress put in place to protect the members of dozens of independent government agencies.
But in Monday's decision, written by Chief Justice John Roberts, the court's majority cited writings by James Madison -- a framer of the US constitution who became president -- and other Supreme Court rulings that empowered the president on personnel decisions.
"Independent agencies are not 'independent' in the sense that they are free of the President and thus responsive 'only to the people of the United States,'" Roberts wrote in a decision that frequently cited earlier rulings.
In a scathing dissent, Justice Sonia Sotomayor wrote that the majority opinion had upended the separation of powers.
"Today, the majority replaces 90 years of proven, workable practice with a half-baked theory of executive power that is simultaneously all encompassing yet also subject to necessary but undefined exceptions," Justice Sotomayor wrote.
"The one thing that does appear to be clear going forward is that chaos will follow."
Democratic Senator Elizabeth Warren slammed the opinion, saying "Donald Trump has fired Democratic appointees and seized control of formerly independent agencies so they serve him and his billionaire friends instead of the American public."
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