Former immigration minister Phil Woolas' re-election to his Oldham East and Saddleworth seat has been declared void, a special election court has ruled.
Two high court judges, delivering their ruling this morning after a five-day hearing in September, concluded that Woolas had misrepresented facts relating to Liberal Democrat challenger Elwyn Watkins under section 106 of the Representation of the People Act 1983.
Woolas responded by saying he would seek a judicial review of the decision, arguing through a statement issued by his solicitor that the ruling would "inevitably chill political speech".
But this afternoon Labour's deputy leader Harriet Harman confirmed he had been suspended from the party.
Speaker John Bercow will announce to the Commons in a statement on Monday whether or not a by-election will take place immediately in Oldham East and Saddleworth.
Mr Watkins lost the seat by just 103 votes in the general election. But he alleged that Woolas published election literature containing misleading statements about Mr Watkins' campaign financing and his approach to extremist voters.
Judges backed his claims, meaning Woolas is now open to prosecution and could find himself forced to pay a fine and be barred from public office for three years.
"This election petition raised fundamental issues about freedom to question and criticise politicians," Woolas' statement said.
He pointed out the court had adopted an interpretation of conduct decided in a case nearly 100 years ago in considering a 19th century statute.
"It is vital to our democracy that those who make statements about the political character and conduct of election candidates are not deterred from speaking freely for fear," Woolas added.
The man who could yet become Saddleworth's MP, Mr Watkins, issued a statement of his own calling the verdict a victory for "fair play" and "clean politics".
"Anyone who knowingly lies to the voters or looks to set constituent against constituent has no place in a democracy," he said.
"I hope this judgment makes it very clear that if you deceive your constituents you should be kicked out of parliament."
Labour leader Ed Miliband's decision to appoint Woolas to a frontbench role has attracted criticism from the Conservatives' chairman Sayeeda Warsi.
"Ed Miliband still hasn't even condemned the man he appointed as his shadow immigration minister," she said.
"We're starting to see a level of dithering from Ed Miliband that would embarrass even Gordon Brown."
But Ms Harman emerged to condemn her ex-colleague's behaviour as the afternoon wore on.
"It's an unprecedented event. Nothing like this has happened for 100 years," former lord chancellor Charles Falconer told BBC News 24.
"It is bound to have ramifications for how people conduct elections in the future."
It emerged during the five-day hearing which took place in September that the Labour candidate had ordered a "s**t or bust" strategy against Mr Watkins.
Woolas argued his attempts to highlight Mr Watkins' campaign funding and who he was associating himself with politically were legitimate, however. He has consistently denied wrongdoing.