It 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 Mr Zuma's impeachment.
They accuse him of using "ill-gotten wealth" to upgrade his home with a swimming pool and amphitheatre.
A government statement said he would "reflect" on the judgement and take "appropriate action".
An anti-corruption body, known as the public protector, ruled in 2014 that $23m (£15m) had been spent on his rural home in Nkandla in South Africa's KwaZulu-Natal province.
Mr 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.
Mr 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.
Mr 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".
What Mr Zuma must pay for:
- Swimming pool
- Amphitheatre
- Visitor centre
- Cattle enclosure
- Chicken run
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