His party later unanimously agreed to re-nominate him as a candidate for prime minister, indicating that Thailand is still not free from its deep political crisis that has virtually paralyzed the government, spooked the financial markets and scared away tourists.
"The defendant has violated Article 267 of the constitution, and his position as prime minister has ended," the head of the nine-judge panel, Chat Chonlaworn, said. He said the Cabinet will remain in a caretaker position until a new administration is installed.
The judgment, broadcast live on television and radio, was greeted with loud cheers and claps from Samak Sundaravej's opponents who have occupied his office compound since Aug. 26 to demand his resignation.
Samak, a self-proclaimed foodie, hosted a popular television cooking show - "Tasting and Complaining" - for seven years before becoming prime minister. But he also made several appearances after taking office, breaking a constitutional prohibition on private employment while in office.
"His employment at the company can be considered an employment," said Chat. He said Samak gave "conflicting testimony" and that there was an attempt to fabricate evidence "to hide his actions."
Before the court began its session, Samak had said he would honor the verdict. He was not immediately available for comment.
Samak had claimed that he was not an employee of the company that made the show and only received payment for his transportation and the ingredients used for cooking.
The verdict provided a new twist to Thailand's political uncertainty that began in early 2006 when a group of royalists, urban residents and union activists, calling themselves the People's Alliance for Democracy, started demonstrating against then Prime Minister Thaksin Shinawatra, accusing him of corruption.
The relentless demonstrations, led by media tycoon Sondhi Limthongkul and four others, led to a military coup that ousted Thaksin. The junta called elections in December 2007, which were won by a coalition of Samak's People's Power Party and five other parties.
It triggered a fresh round of demonstrations by the alliance, which accuses Samak of being a proxy for Thaksin, who has fled to Britain to avoid facing corruption charges.
On Tuesday, leading English-language daily, The Bangkok Post proclaimed: "Today, Mr. Samak looks to have hit a dead end on his political road."
Samak had refused to resign or call fresh elections, and many believed the court ruling could give him an opportunity to make a graceful exit without losing face.
Kuthep Saikrajang, the spokesman of Samak's party, said its members unanimously agreed to re-nominate Samak in Parliament as their candidate for the prime minister's post. But the final decision depends on Samak as well on other parties in the ruling coalition, he said.
It is not clear whether this would again violate the Constitution, and such a move could also inflame supporters of the People's Alliance for Democracy.
There was also no sign that the alliance supporters would now vacate the Government House compound.
"Samak was ousted by the court but there is no guarantee he will not return in the next few day. So our protest will continue for the time being," said alliance spokesman Suriyasai Katasila.
Samak is also facing other legal problems - the Election Commission has recommended that his party be dissolved for vote fraud, and he faces a defamation suit and three possible corruption cases.