The case before the European Court of Human Rights (ECHR) concerned 10 prisoners who were unable to vote in elections to the European Parliament on June 4 2009.
The ECHR ruled that there had been a violation of Article 3 of the European Convention on Human Rights - right to a free election.
Judges said they reached this conclusion as the case was identical to another prisoner voting case in the UK, in which the blanket ban was deemed a breach.
The court rejected the applicants' claim for compensation and legal costs.
The judges said they had recognised recent steps taken in the UK with the publication of a draft bill and the report of the Joint Committee on Prisoner Voting Rights appointed to examine the bill, which came back with a key recommendation to allow prisoners who were serving 12 months or less to be eligible to vote.
However, as the legislation remained unamended, the Court concluded there had been a violation of the convention.
However, the Government has escaped the prospect of having to make pay-outs in hundreds of similar cases before the ECHR in light of the ruling on compensation and legal costs.
A Ministry of Justice spokesman said: "The Government has always been clear that it believes prisoner voting is an issue that should ultimately be decided in the UK."
He added: "The Government is reflecting on the report from the Joint Committee on Prisoner Voting Rights and is actively considering its recommendations.
"This is not a straightforward issue and the Government needs to think carefully about the recommendations, which included new options for implementation."
In 2005, the ECHR in Strasbourg ruled that the UK's ban on prisoners voting was unlawful following a claim made by convicted killer John Hirst.
But, in 2011, MPs voted by an overwhelming 234 to 22 to preserve the ban, in spite of the ECHR ruling.
Justice Secretary Chris Grayling published a draft bill in 2012 offering MPs three options - giving the vote to prisoners serving less than four years, or less than six months, or keeping the ban.
The joint committee put forward a fourth option - calling on the Government to table a Bill granting the vote in local, general and European elections to those serving less than 12 months or within six months of release, with exceptions for those convicted of particularly serious crimes.
Juliet Lyon, director of the Prison Reform Trust, said: "This judgment reinforces the need to implement recommendations on enfranchisement made by the Joint Committee on Prisoners Voting.
"The UK Government cannot continue to flout human rights law by preventing people in prison from behaving responsibly by voting in free elections."
Isabella Sankey, Liberty's policy director, said: "While some Conservatives play cheap politics with Churchill's human rights legacy, the court urges the Government to listen to its own cross-party parliamentary committee and remove the blanket ban on prisoner voting.
"Despite a violation of almost 10 years, the court has shown patience and respect for parliamentary sovereignty - even now declining to award damages or costs."