The FTO designation had allowed to the United States to take strong unilateral moves against a group's members and associates, seizing assets, blocking travel to the United States, deportation, and -- significantly -- jailing for up to 20 years anyone found providing "material support" for them.
None of the five are seen as currently active organizations and the State Department must review FTO designations every five years to see if they remain warranted.
"Our review of these five FTO designations determined that, as defined by the INA, the five organizations are no longer engaged in terrorism or terrorist activity and do not retain the capability and intent to do so," the department said in a statement.
The revocations "recognize the success Egypt, Israel, Japan, and Spain have had in defusing the threat of terrorism by these groups," it said.
Kahane Chai, which grew out of Kahane's Kach movement, was designated an FTO in 1997, three years after its supporter Baruch Goldstein massacred 29 Palestinians in the occupied West Bank city of Hebron.
The group's founder, an advocate of expulsion of Arabs from Israel, was assassinated in New York in 1990.
ETA was blamed for killing hundreds in attacks as the group sought an independent Basque homeland over four decades. Eight years declaring after a ceasefire in 2010, it dissolved itself.
The Mujahidin Shura Council was blacklisted for its role in rocket attacks in Israel over 2010-2013.
Gamaa Islamiya group was built around Abdel Rahman, a radical Islamist and US resident who allegedly inspired the deadly 1993 bombing of New York's World Trade Center.
He was convicted in 1995 over several bomb plots and sentenced to life in prison.
Removal of the FTO label does not drop the five groups from the US Treasury's blacklist.
They remain designated as Specially Designated Global Terrorists (SDGT) entities, which allows the government to continue to hold seized assets and take control of others tied to the groups.