Pete Bethune, a former activist with militant conservation group Sea Shepherd who spent five months in a Japanese prison for his protests, broke down after the verdict.
"Today is a great day for justice," he told journalists at the court.
"This decision sends a clear message to governments around the world that the exploitation of animals will no longer be tolerated and animals must be protected at the highest level," said Claire Bass, head of wildlife campaigns at the World Society for the Protection of Animals.
"All eyes are now on Japan to respect this decision," she said.
The court ruled overwhelmingly in favor of Australia in the case, which the country launched in 2010.
Clare Perry of the Environmental Investigation Agency said the ruling "lays to rest, once and for all, the grim travesty of Japan's so-called 'scientific' whaling."
"Next, the world needs to focus its attention on Japan's whaling in the North Pacific, where it continues to issue permits to kill up to 500 whales annually in hunts using the same 'scientific' clause that has now been condemned beyond dispute by the international court."