The suit pits atheist Alain Simoneau and a secular-rights organization against Saguenay Mayor Jean Tremblay.
In 2011, Quebec's human rights tribunal ordered an end to the prayers, demanded that a crucifix in the city council chamber be removed and awarded damages to Simoneau.
The mayor fought back, raising money from religion supporters through a website and the Quebec Court of Appeal overturned the tribunal last year.
The outspoken politician said at the time it was a fight for Quebec's heritage.
"It is not only the trial of Jean Tremblay," Tremblay said. "It is more than that: it is about the whole culture of Quebec."
While the case was before the court, the prayer was replaced by two minutes of silence.
The appeals court expressed some reservations about religious symbols in the council chamber, but concluded the city imposes no religious views on its citizens.
It said reciting a prayer does not violate the religious neutrality of the city and if the recitation interfered with Simoneau’s moral values, the interference was trivial.
It found the prayers had no discernible effect on the day-to-day running of the city.
The case has been one of many in recent years on emotionally charged identity issues in Quebec. The mayor angrily intervened in the last provincial election to denounce a candidate who had suggested the crucifix should come down at the provincial legislature.
The Supreme Court announcement that it will hear the case comes as Quebec wrestles with the controversial secular values charter proposed by the Parti Quebecois government.
As usual, the court gave no reasons for its decision to hear the appeal.
Tremblay's office was tight-lipped Thursday.
"The mayor of Saguenay will look at this decision before issuing any comment," it said in a statement.
The secular-rights group involved in the legal battle said it was "delighted" with the ruling.
"The Supreme Court is our last recourse to have freedom of conscience recognized," said Lucie Jobin, president of the Mouvement laique quebecois.
Jobin said she would like the high court to define the rights and limits of municipal governments.
If the supremacy of God is mentioned in the Constitution, "what are the obligations of provinces and municipalities vis-a-vis religion," she added.
Jobin said her organization will present a brief next week at the Quebec government's hearings on the charter of values.
"We will be asking for an amendment so that religious symbols and practices are banned at city halls and municipal councils."
It is unclear when the Supreme Court will hear the case. The court generally takes several months to issue a ruling after testimony has been given.