The three judges unanimously agreed there had been a violation of Article 3 of the European Convention on Human Rights - right to free elections.
This was due to the "blanket character" of the statutory ban.
The court made the ruling as it was identical to other prisoner voting cases in which a breach had been found, while no changes had been made to the law.
There has been pressure on the UK authorities to bring in legislation on prisoner voting.
The Council of Europe's Committee noted last September its "profound concern and disappointment" that a Bill had not been introduced.
Prime Minister David Cameron has previously said the controversial issue should be for Parliament to decide and not a "foreign court".
Sean Humber, the lawyer representing 554 prisoners fighting for the right to vote, welcomed the ECHR's ruling, but said compensation should have been awarded, particularly given the lack of government action.
Pointing out the ruling had confirmed the "unlawfulness" of the blanket ban, Mr Humber said successive UK governments had "cynically sought to drag the matter out through a succession of consultations during the last decade".
Mr Humber, from the firm Leigh Day, said: "Unfortunately, we seem to be in the sad position where the Government is taking an almost perverse pleasure in ignoring successive court judgments and is content to continue violating the human rights of thousands of its citizens.
"It should be worrying to all of us that the Government appears to have so little regard for its international human rights obligations or indeed the rule of law."
But the Ministry of Justice said the issue of prisoner voting should be decided in the UK.
An MoJ spokesman said: "The Government has always been clear that it believes prisoner voting is an issue that should ultimately be decided in the UK.
"However, we welcome the court's decision to refuse convicted prisoners costs or damages."
UKIP's home affairs spokesperson, Diane James MEP, said: "UKIP believes that it should be the British parliament which should have the final decision on which laws are implemented in the Britain.
"There should be no unwarranted interference in a national issue."
This was due to the "blanket character" of the statutory ban.
The court made the ruling as it was identical to other prisoner voting cases in which a breach had been found, while no changes had been made to the law.
There has been pressure on the UK authorities to bring in legislation on prisoner voting.
The Council of Europe's Committee noted last September its "profound concern and disappointment" that a Bill had not been introduced.
Prime Minister David Cameron has previously said the controversial issue should be for Parliament to decide and not a "foreign court".
Sean Humber, the lawyer representing 554 prisoners fighting for the right to vote, welcomed the ECHR's ruling, but said compensation should have been awarded, particularly given the lack of government action.
Pointing out the ruling had confirmed the "unlawfulness" of the blanket ban, Mr Humber said successive UK governments had "cynically sought to drag the matter out through a succession of consultations during the last decade".
Mr Humber, from the firm Leigh Day, said: "Unfortunately, we seem to be in the sad position where the Government is taking an almost perverse pleasure in ignoring successive court judgments and is content to continue violating the human rights of thousands of its citizens.
"It should be worrying to all of us that the Government appears to have so little regard for its international human rights obligations or indeed the rule of law."
But the Ministry of Justice said the issue of prisoner voting should be decided in the UK.
An MoJ spokesman said: "The Government has always been clear that it believes prisoner voting is an issue that should ultimately be decided in the UK.
"However, we welcome the court's decision to refuse convicted prisoners costs or damages."
UKIP's home affairs spokesperson, Diane James MEP, said: "UKIP believes that it should be the British parliament which should have the final decision on which laws are implemented in the Britain.
"There should be no unwarranted interference in a national issue."
