This result, the smallest majority for 87 years, came after two recounts and immediately prompted Tory accusations that mistakes by election officials had denied Mr Malone victory. In particular, the former MP claimed that the failure by the returning officer's staff to stamp 55 ballot papers with an official mark, leading to their rejection, cost him a win - also by two votes.
Yesterday, Lord Justice and Mr Justice Gage accepted Mr Malone's arguments at a brief High Court hearing and agreed to void the election result.
The court's decision will be reported to the Speaker when the House of Commons re-assembles in three weeks, and she will announce the date of a by-election - probably before Christmas.
Mr Oaten will remain MP until the by-election. The returning officer, Lindsay Garrett Fox, will bear the pounds 50,000 costs of the hearing but is believed to be insured.
After the judgment, Mr Oaten, who did not oppose the petition, said: "I'm delighted that with a by-election the people of Winchester can settle this."
Mr Oaten said at the general election that he had put forward a programme to save the NHS and improve education and was confident of victory.
However, Mr Malone was in bullish mood, claiming that he had already "won" in May. The party had won the Uxbridge by-election and the public mood was swinging to them, he said.
The outcome of the new election will be hard to call. The Liberal Democrats felt cheated in the May poll by a "hoax" candidate, Richard Huggett, who stood as the "Liberal Democrat - Top Choice for Parliament" candidate and picked up 640 votes.
Against that the Referendum Party and UK Independence Party, both now disbanded, attracted more than 2,000 votes between them - votes most likely to go to Mr Malone.
Labour, whose candidate picked up 6,500 votes in May, are almost certain to stand again, although they left the door just ajar to a possible agreement with the Liberal Democrats when sources said it was "highly unlikely" they would not put up someone - without ruling it out.
The last time a parliamentary result was annulled was at Exeter in 1910, when the Liberals won the original poll by three votes. The Conservatives won the re-run - by one vote.
Winchester's acting returning officer, David Cowan, welcomed yesterday's ruling but added: "There is probably a one in ten thousand chance of these circumstances happening."
In a separate issue, police have investigated two alleged cases of personation in the Winchester election , and one person is due before Basingstoke magistrates next week charged under the 1983 Representation of the Peoples Act.
e In the May poll the Liberal Democrats received 26,100 votes; the Conservatives 26,098; and Labour 6,528.Reuse content