The American woman, 22, and her 25-year-old former boyfriend Raffaele Sollecito are accused of murdering Kercher after she refused to take part in a brutal sex game.
The body of the British student, 21, was found with her throat cut in a bedroom of the house in Perugia she shared with Knox and two Italian women in November 2007.
Summing up the case, prosecutor Giuliano Mignini said on the night of the murder, Knox and Sollecito arrived at the house with Rudy Guede.
Guede has already been sentenced to 30 years for Meredith's murder and sexual assault.
"Meredith and Amanda began to argue over money, Meredith was also upset that Amanda had brought another man (Guede) back to the house," he said.
"They argued about this ugly habit of hers and the three who had arrived were also under the influence of drugs and alcohol."
Mignini added: "Meredith was far too serious a girl for her, Amanda didn't like her, she didn't like her friends because they were critical of her hygiene and habits.
"Amanda coveted hatred for Meredith and that night the time had come for her to take revenge."
The court also heard that Knox "dominated" her relationship with computer studies graduate Sollecito, who in turn was "dependent on her."
Mignini said this could be seen in TV footage from the time of the murder in the way Sollecito was "following on behind her, often kissing and cuddling her."
Both are accused of smashing a window in Meredith's bedroom to make the death look like the result of a botched burglary.
Mr Mignini told the Italian court: "The key to this mystery is in the room where the supposed break-in took place.
"This break-in is the nail of Knox and Sollecito's defense — but it was all simulated.
"It would have been manna from heaven for them if blood or other genetic evidence had been found on the broken glass or window frame, but nothing was found.
"This hypothetical thief then did something quite remarkable — he didn't take anything of value. No jewelry was missing, computers were left at the scene as well as designer bangs and clothes.
"A 'very strange break-in' was, in fact, how the first police officer who arrived at the house described it — they could not believe that nothing of value was taken."
Mignini also pointed out how fragments of glass had been found on top of clothes scattered on the bedroom floor.
This, he said, was also unusual for a break-in, especially if the wardrobe had been ransacked after the window was broken.
In his summing up, Mignini also referred to the evidence from Meredith's British friends, who had described the tense relationship between her and Knox because she "did not flush the toilet and was unhygienic".
He added that Knox and Sollecito's defense had been trying to blame Guede.
Earlier this week Guede, 22, appealed his conviction and, as reporting restrictions do not exist in Italy, he claimed in court he had seen "Knox's silhouette" leaving the murder scene after he found Meredith's body.
The summing up is expected to last until Saturday when Mignini and his fellow prosecutor Manuela Comodi will ask judge Giancarlo Massei to jail the pair for life.
Meredith, a Leeds University student, from Coulsdon, Surrey, was in Perugia as part of her European Studies degree and had only been in Italy for two months before her death.
Both Knox and Sollecito deny the accusations against them and insist they were at his house on the night of the murder.
Their trial began in January and because of other commitments for the judge, prosecution and defense has only been sitting on Thursdays and Fridays.
In total more than 80 witnesses have been heard and in the coming weeks Knox and Sollecito's legal teams will present their summing up.
The judge has already said he will retire with the jury on December 4 and return a verdict the following day.