A probate judge made the decision at a presumption of death hearing in a Jefferson County courtroom in Birmingham Thursday afternoon.
Holloway was 18 when she was last seen in the early hours of May 30, 2005, leaving an Oranjestad nightclub with Joran van der Sloot and two other men.
She was visiting the island with about 100 classmates to celebrate their graduation from Mountain Brook High School in suburban Birmingham.
Van der Sloot was detained twice in connection with Holloway's disappearance but never charged.
Holloway's father, Dave Holloway, filed the petition to declare her dead in June. Beth Holloway, his ex-wife and the teen's mother, has said she opposes the move, saying in a September statement she "will always hope and pray for Natalee's safe return."
Dave Holloway's attorney said the petition was filed because he "is seeking closure for his family."
Dave Holloway wants to use $2,000 of a college fund he had created for his daughter for her younger brother, CNN affiliate WBRC reported.
In a September hearing, a Jefferson County, Alabama, probate judge ruled the petition could go forward, WBRC said.
A notice of presumption of death must be published in a local newspaper for two successive weeks, Judge Alan King ruled, followed by a 12-week time frame to submit any evidence the teen is still alive, WBRC said. Barring any such evidence, the judge will be able to declare her dead.
On Wednesday, van der Sloot pleaded guilty to all the charges against him in connection with the killing of a Peruvian woman in 2010.
The 24-year-old Dutch national faces a sentence of 30 years for that killing.
Investigators believe van der Sloot killed Stephany Flores after she found something related to the Holloway case on van der Sloot's computer as she visited with him in his hotel room.