The religious hardliners had deemed the statue "un-Islamic" and wanted the statue the Bangladeshi version of the Greek goddess of justice to be replaced with a Quran.
The statue's creator, sculptor Mrinal Haque said the move is a victory of Islamists, saying it felt like "clearing a dead body".
"Even my mother's death did not make me so grief-stricken," Haque told AFP, adding the court's decision represented a victory for Islamists who have staged months of protests against the statue.
The removal of the statue also sparked demonstrations outside the court premises and on the Dhaka University campus, a secular bastion, from activists who see it as a worrying sign of increasing Islamisation.
Police fired rubber bullets, tear gas and water cannons to disperse hundreds of students and left-wing activists protesting the removal, according to an AFP photographer at the scene.
"It is a betrayal of the people. The depressing thing is that the government is using it as a political tool," top secular activist Imran Sarkar told AFP.
Haque said the authorities had surrendered to the Hefazat-e-Islam.