Community groups say it's an important step to prevent over-policing.
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But some police unions say it's going to make it harder for police to work effectively.
"I think it's a very important decision," says Sujung Kim, a managing attorney at the San Francisco Public Defender's Office.
She says with this ruling, the Supreme Court of California is finally recognizing instances of over-policing -- especially in communities of color.
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"For, you know, innocent behavior. For just being in a certain neighborhood and characterized as criminal. The court has finally acknowledged that fact," Kim said.
On Thursday, the court ruled to restrict the grounds under which police can stop and hold people for questioning. It stems from the case The People vs. Marlon Flores.
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"The only thing he did was, he was standing by a car at night in an area that the police deemed to be a high-crime area. And his so-called odd behavior was that he, the police say, he ducked down, trying to tie his shoes. And was seeming to avoid police interaction," Kim said.
The court ruled that police can't detain someone on the street just because that person tries to avoid contact with them.
In her opinion, Associate Justice Carol Corrigan writes: "But before an officer can compel compliance with a show of authority... articulable facts must support a reasonable suspicion of criminal activity. In the absence of such facts, the person is constitutionally protected and empowered to go on his or her way."
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In an email to ABC7 News, Tracy McCray, president of the San Francisco Police Officers Association calls this another example of California's criminal justice system working to protect criminals.
She writes: California's politicians and courts are making it harder and harder for police officers to do their job to protect the communities we serve. The California Supreme Court just opened a giant loophole that will be used by thousands of drug dealers, gang members, sex traffickers, and burglars who will attempt to use this very subjective standard to get back on the street as soon as possible to victimize the people who live, work and travel here. Observing the actions of those we encounter is a critical part of police work and has never been grounds alone for an arrest. Unfortunately, that will not matter when every public defender and criminal defense attorney in the State rushes to file appeals to get their clients freed because they were 'just nervous.'"
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But many community groups don't agree with that analysis.
"Obviously, police officers do have a lot of discretion on the streets. They do still have a lot of leeway. There (are) a lot of ways you can interpret reasonable suspicion," said Dr. Frances Ramos, with Communities United For Restorative Youth Justice, or CURYJ.
She is encouraged by the Supreme Court ruling. Especially because of, as she points out, how a routine police stop can quickly escalate into pat down or detention.
"We are going up against somebody, who is armed, and who we have seen has the full support of the state behind them, in terms of treating the average person however they think they should be treated," Ramos said.