Federal district court Judge Richard Leon issued a ruling that approved the $85.4 billion deal, without any conditions, in a locked courtroom with windows papered over, according to multiple media outlets stationed outside the courthouse.
"We are disappointed in the ruling," Assistant Attorney General Makan Delrahim said in a statement shortly after the ruling.
AT&T is known to most Americans as a cell phone service provider while Time Warner owns giant media brands such as the HBO movie channel, the Warner Brothers movie studio and CNN.
Delrahim said the Justice Department remains committed to preserving competition for the benefit of consumers and is reviewing its options.
The Justice Department must now decide whether to allow the merger to proceed or appeal the decision to a higher court.