The court gave the treasury 60 days to determine how much he should repay.
The ruling is a victory for the opposition, who said they would push for Jacob Zuma’s impeachment.
They accuse him of using “ill-gotten wealth” to upgrade his home with a swimming pool and amphitheatre.
Jacob Zuma has denied any wrongdoing.
A government statement said Jacob Zuma would “reflect” on the judgement and take “appropriate action”.
An anti-corruption body, known as the public protector, ruled in 2014 that $23million had been spent on Jacob Zuma’s rural home in Nkandla in South Africa’s KwaZulu-Natal province.
Jacob Zuma had “unduly benefited” from the renovations and should repay a portion of the money, the public protector said.
In a unanimous judgement on behalf of the Constitutional Court’s 11 judges, Chief Justice Mogoeng Mogoeng said the public protector was a “Biblical David” fighting against the Goliath of corruption.
Jacob Zuma’s failure to repay the money was “inconsistent” with the constitution, he added.
“The president failed to uphold, defend and respect the constitution,” he declared.
Mogoeng Mogoeng added that public officials ignored the constitution at their peril, and should remember that the rule of law was the “sharp and mighty sword that stands ready to chop the ugly head of impunity from its stiffened neck”.
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