Wodjan Ali Seraj Abdulrahim Shaherkani, one of the first two female athletes sent to the Olympics by the conservative Muslim kingdom, is due to compete in the women's heavyweight tournament next Friday.
"She will fight according to the principle and spirit of judo, so without a hijab," International Judo Federation president Marius Vizer said.
The decision is likely to cause controversy in Saudi Arabia, where female participation in sports has long been a controversial issue. Powerful clerics denounce women for exercising, saying it goes against their natural role.
A Saudi official had told Reuters earlier this month they expected that the women would have to obey the dress code of Islamic law. He did not elaborate, but other conservative Muslim countries have interpreted this to mean a headscarf, long sleeves and long pants.
Shaherkani, who will compete in the 78-kg category in judo, and teenage 800 metre runner Sarah Attar were the first Saudi women allowed to take part in the Olympics after talks between the International Olympic Committee and the country.
The decision to allow female Saudi athletes to compete at London was praised by IOC President Jacques Rogge at the time.
"This is very positive news and we will be delighted to welcome these two athletes in London in a few weeks time," Rogge said in a statement in early July.
"The IOC has been striving to ensure a greater gender balance at the Olympic Games, and (today's) news can be seen as an encouraging evolution."
Saudi Arabia was one of three countries, alongside Brunei and Qatar, never to have sent female athletes to the Olympics but the latter two confirmed earlier this year that their delegations would include women. (Editing by Ossian Shine and Sonya Hepinstall)