Facebook has been banned from stopping users in Germany creating accounts under false names.
The data protection authority in Hamburg said Facebook could not change people's chosen names or ask them to provide any official ID.
The new ruling came into place after Facebook blocked an account set up by a woman using a pseudonym and changed it to her name.
Facebook is disappointed with the rule.
The firm said: "The use of authentic names on Facebook protects people's privacy and safety by ensuring people know who they're sharing and connecting with."
Facebook's real name policy has caused protests from demonstrators outside its headquarters in California.
Back in October 2014 Facebook clarified its real-name policy stating users would have to "use the authentic name they use in real life."
The watchdog in Hamburg, which regulates the social network in Germany, said by making users sign up with their real names it violated an individual's privacy rights.
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