The High Court ruled the News of the World did breach Mr Mosley’s privacy, awarding him £60,000 in damages.
Mr Justice Eady said he could expect privacy for consensual “sexual activities (albeit unconventional)”.
Mr Mosley admitted a sado-masochistic sex session with five prostitutes, but denied that it had a Nazi theme.
His father was the 1930s fascist leader Sir Oswald Mosley.
The paper’s story was based on a secret video from one of the women who took part in the sex session at a London flat in March.
At the High Court, Mr Justice Eady said there was “no evidence that the gathering on 28 March 2008 was intended to be an enactment of Nazi behaviour or adoption of any of its attitudes. Nor was it in fact.
Max Mosley ‘delight’ over court ruling
“I see no genuine basis at all for the suggestion that the participants mocked the victims of the Holocaust.”
The “bondage, beating and domination” that did take place was “typical of S&M behaviour”, he said.
“But there was no public interest or other justification for the clandestine recording, for the publication of the resulting information and still photographs, or for the placing of the video extracts on the News of the World website – all of this on a massive scale.”
However, the judge did not make the unprecedented award of punitive – rather than compensatory – damages that had been sought by Mr Mosley.
He said: “It is perhaps worth adding that there is nothing ‘landmark’ about this decision.
“It is simply the application to rather unusual facts of recently developed but established principles.”
The newspaper also faces a bill of around £850,000 for legal costs.
Outside the High Court, Mr Mosley said he was “delighted with that judgement, which is devastating for the News of the World”.
“It demonstrates that their Nazi lie was completely invented and had no justification,” he said.
Colin Myler says the freedom of the press is damaged
“It also shows that that they had no right to go into private premises and take pictures and film of adults engaged in activities which are no-one’s business but those of the people concerned.”
The 68-year-old says his life has been devastated by the News of the World story and the posting of the video footage on its website.
He told the court that the publicity had been “totally devastating” for his wife of 48 years, and he could think of “nothing more undignified or humiliating” for his two sons to experience.
News of the World editor Colin Myler said the paper was pleased at the lack of punitive damages, but added that “our press is less free today after another judgement based on privacy laws emanating from Europe”.
As the head of the richest sport in the world, with almost 125 million members, Mr Mosley “had an obligation to honour the standards which its vast membership had every right to expect of him”, Mr Myler said.
“Taking part in depraved and brutal S&M orgies on a regular basis does not, in our opinion, constitute the fit and proper behaviour to be expected of someone in his hugely influential position.”
Mr Myler maintained that the paper believed its reports were “legitimate and lawful and, moreover, that publication was justified by the public interest in exposing Mr Mosley’s serious impropriety”.Legal analyst Joshua Rozenberg said the court ruling was a “warning” to journalists.