It is not yet known where in the city the HoGeSa demonstrators will gather.
In October 2014, dozens of police officers were hurt when more than 4,000 self-proclaimed hooligans and far-right demonstrators chanting "foreigners out" gathered in the western cathedral city and became violence.
It took hours and the deployment of water cannons for the police to bring the crowds under control and take them in small groups to the main train station, where they were forced to leave.
That was the basis for a legal challenge against the demonstration filed by police chief Wolfgang Albers which the Upper Civil Court in the city has now rejected, the Kölner Stadt-Anzeiger (KSTA) reports.
While judges have said the demo can go ahead, the group will only be permitted to hold a demonstration at a single location, not a march through the city centre as in 2014.
On the same afternoon, around 500 followers of "Kögida" – the Cologne offshoot of Dresden-based anti-Islam movement Pegida – are expected to rally at the city's Heumarkt.
Police are still deciding whether to allow that demonstration to go ahead.
Birlikte, an alliance of around 50 organizations, including churches, political parties, charities and other groups, has announced a combined counter-demonstration and cultural festival to take place at the same time.
Cologne is on high alert over far-right extremists after Henriette Reker, a pro-refugee mayoral candidate with broad political support, was stabbed by a far-right activist last Saturday out of what police called 'racist' and 'political' motives.
Reker went on to win the election but is still in intensive care as doctors treat her for a serious wound to the neck.