Mr Justice Eady, who heard the case without a jury, has awarded Mr Mosley, 68, £60,000 damages. Mr Mosley, the son of Sir Oswald Mosley the 1930's British fascist leader, took legal action after the newspaper alleged: "In public he rejects his father's evil past but secretly he plays Nazi sex games."
The paper had secretly filmed Mr Mosley engaged in two sex sessions with five prostitutes in a flat in Chelsea in March, which he rented for his private sex sessions.
The newspaper put the film of what it described as a "sick Nazi orgy" on its web site and accused Mr Mosley on its front page of playing the role of a concentration camp commandant, a claim he vehemently denied.
Mr Mosley decided not to issue libel proceedings but sued the newspaper for an intrusion of his privacy. His case was bolstered by the Human Rights Act which came into force in 2000. The legislation brought in a new civil law known as "misuse of private information".
The paper resisted the privacy action on the public interest grounds that Mr Mosley, as one of the most powerful figures in Grand Prix racing, was a public figure.
His victory could lead to a flood of similar cases by celebrities whose private lives have been the subject of tabloid newspaper revelations. Lawyers have warned the ruling has serious implications for press freedom.
Mr Mosley, who has been married for 47 years, told the privacy hearing at the High Court that he had been a sadomasochist for 45 years. He described his behaviour with the prostitutes as "a perfectly harmless activity". He "'fundamentally disagreed" that what he did was in any way depraved. His wife of 47 years, he said, had found the revelations "totally devastating".
The newspaper's case was undermined, according to legal experts, when it emerged that it had promised £25,000 to one of the prostitutes, who filmed the sessions, but paid her half the amount. Colin Myler, the editor, in his evidence blamed the credit crunch. Mr Mosley's legal team argued the payment had been reduced because the Nazi allegation could not be proven.
The newspaper's case was further undermined when the prostitute, who alleged that the romp comprised Nazi play-acting, was judged too mentally frail to give evidence.
James Price, QC, for Mr Mosley, told the court that the "gross and indefensible intrusion'' was made substantially worse by the entirely false suggestion that Mr Mosley was playing a concentration camp commandant and a cowering death camp inmate. He told the court: "Most people think S & M behaviour - spanking, bondage, whipping role-play like doctors and nurses or guards and prisoners - is harmless."
Mr Justice Eady, as a High Court judge, has made a name for himself in a number of cases by extending the law of privacy.