Thailand's ousted Prime Minister Thaksin Shinawatra and 110 other senior party officials have been banned from political office for five years.
Mr Thaksin and his party still enjoy huge popularity in Thailand
The Constitutional Tribunal also ordered Mr Thaksin's Thai Rak Thai party to be dissolved after finding it guilty of violating electoral laws.
Judges ruled that two members had bribed smaller parties to influence the result of elections in April 2006.
Mr Thaksin was later removed in a military coup, accused of corruption.
The verdicts were announced in a heavily guarded courtroom in the capital, Bangkok, after hours of suspense.
"All of the Thai Rak Thai party executives at the time the wrongdoing was committed will be subject to the ban.
"Even if they quit later, they cannot escape the guilt," said one of the nine judges involved in the ruling.
Mr Thaksin resigned as party leader days after he was overthrown in the military coup in September. He now lives in exile in London.
A lawyer for the former prime minister told Reuters news agency he was "disappointed" by the verdict.
"It's too harsh on Thai Rak Thai," said Noppadon Pattama.
The BBC's Andrew Harding in Bangkok says the decision to punish the entire party is sure to provoke anger in Thailand.
Thai Rak Thai officials have promised to respect the verdict, and those who can will no doubt try to form a new party to compete in elections, our correspondent says.
An interim government, installed by military leaders that led the coup, has promised a new constitution and elections before the end of 2007.
Rise and fall
The capital is reported to be relatively calm. But thousands of soldiers are on alert in case of unrest following the verdicts.
Interim Prime Minister Gen Surayud Chulanont, who was installed after Mr Thaksin's overthrow, has said he would issue an emergency decree if necessary.
Thousands of soldiers are on alert in case of unrest after the verdicts
Earlier, the same court found Thailand's oldest party, the Democratic Party, not guilty of six charges of election fraud.
The court ruled that it had not maligned the Thai Rak Thai party during last year's election campaign, and thus would not be forced to disband.
Thaksin Shinawatra, the wealthy founder of a telecommunications empire, set up the Thai Rak Thai (Thai Loves Thai) party in 1998, and its rapid emergence transformed Thai politics.
He swept into power in 2001, and became the first prime minister in Thailand's history to lead an elected government through a full four-year term in office.
Eighteen months later he was out of office after a military coup, accused of corruption and abuse of power.