"It is obvious that the recount cannot be conducted in compliance with the requirements of equal protection and due process without substantial additional work," the court said.
A majority of the judges saw constitutional problems with the recounts, which would have boosted the position of Democrat Al Gore, and they do not appear to have left any time for Florida to come up with a remedy.
"It is obvious that the recount cannot be conducted in compliance with the requirements of equal protection and due process without substantial additional work," the court said.
Analysts say the ruling was ostensibly a compromise, but it deals a severe blow to Mr Gore's chances of victory and all but transforms Mr Bush into president-elect.
Mr Bush was described as "very pleased and gratified" with the ruling, according to his top representative, James Baker.
Democratic National Committee Chairman Ed Rendell urged Mr Gore to admit defeat: "He should act now and concede."
Mr Gore was "reviewing" the ruling and wanted "to be able to read through it and understand before being out there speaking about it", one of his aides said.
Without further hand recounts it is hard to see how Mr Gore can catch up in Florida, where he trails Mr Bush by fewer than 200 votes out of more than six million votes cast.
Long deliberations
Tension had been rising in Washington as the judges neared the end of a second day of discussions.
The judgement was finally released at 2205 (0305 GMT).
The justices resumed work in Washington on Tuesday after long deliberations on Monday during which they heard 90 minutes of arguments from Mr Bush and Mr Gore's legal teams.
The nine judges had been considering whether the recount of some 40,000 disputed ballots in the pivotal state of Florida should resume or be abandoned .
Meanwhile the Republican-dominated federal legislature in Florida prepared for a constitutional clash - should the Federal Supreme Court rule in favour of Mr Gore - by taking further steps to appoint its own pro-Bush representatives to the Electoral College.
Endless wrangles
There have now been five weeks of legal dispute and bitter recrimination since 100 million Americans cast their votes in the presidential race.
Vice-President Gore needed the Supreme Court to allow a manual recount of votes in parts of Florida to go ahead to keep his White House hopes alive.
His lawyers argued that the original machine counts did not register significant numbers of votes for Mr Gore in staunchly Democrat areas, thus robbing him of the Electoral College votes he needed in Florida to clinch the White House.
Mr Bush's lawyers argued that hand recounts are "arbitrary, capricious, unequal and standardless" and should not be allowed.
On Saturday, the Supreme Court ruled by the narrowest margin, 5-4, on Saturday to stop the recount in Florida, overruling a decision by the Florida supreme court 24 hours earlier.
The Federal Supreme Court is widely respected in the US as the nation's ultimate impartial arbiter and many Americans were shocked that the Saturday ruling split so clearly along party lines.
The lower house of the Republican-controlled legislature on Tuesday approved a team of pro-Bush voters to the Electoral College.
Tuesday's Supreme Court ruling does not completely rule out the possibility of a constitutional nightmare of both Mr Bush and Mr Gore claiming Florida's 25 Electoral College votes.
The Florida senate is likely to ratify the lower house decision on Wednesday.
The Supreme Court hearing is the latest stage in a protracted legal battle that has bounced the candidates back and forth from court to court.
This is the first time in US history that a disputed presidential election has ended up before the nation's highest court.
The story so far
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