By a majority of 6-1 a panel of seven law lords decided that the former dictator of Chile could not claim immunity from prosecution as a former head of state. But in a caveat they drastically restricted the scope and number of charges facing him in an extradition request from Spain.
Giving the judgment, the senior Law Lord, Lord Browne-Wilkinson, invited Mr Straw to become involved. He said: "In view of the very substantial reduction in the number of extraditable charges, the matter will require to be reconsidered by the Secretary of State."
Lord Browne-Wilkinson said Pinochet, 83, could not be extradited for tortures committed in Chile before late 1988 - when the Criminal Justice Act 1988 made torture an "extraterritorial" crime under British law.
He added that, while Pinochet was entitled to immunity in relation to the charges of conspiracy to murder, he was not entitled to state immunity in relation to the remaining charges.
The bulk of the Spanish allegations against Pinochet related to torture offences in the early months and years after he seized power in a bloody military coup in September 1973.
Those campaigning for General Pinochet to face justice - human rights groups like Amnesty International, Balatasar Garzon, the Spanish judge seeking his extradition and a number of British MPs - welcomed the decision that totalitarian rulers cannot hide under a cloak of immunity. In Madrid, Judge Garzon said he remained confident there was enough left in the charges to achieve extradition.
But supporters of the former dictator expressed satisfaction that the majority of the crimes against him had been ruled inadmissible, and said they felt confident he would soon be on his way home to Chile.
The General's lawyers immediately mounted a fresh challenge in the High Court for a writ of habeas corpus, and to seek leave for a judicial review of Mr Straw's decision on 9 December last year to authorise the extradition process. Counsel Clive Nicholls QC, for Pinochet, told the court: "This is the clearest case where the Secretary of State's authority to proceed is fatally flawed."
Lord Justice Laws, sitting with Mr Justice Cresswell and Mr Justice Latham, adjourned the case until Monday to enable the Home Secretary to study the Lords ruling. In a statement, the Home Office said Mr Straw would "reconsider the matter... in the light of the House of Lords judgment... as swiftly as possible.
The Home Secretary came under immediate pressure from General Pinochet's Tory supporters to let him go. Baroness Thatcher said Mr Straw "should bring an end to this damaging episode and allow Senator Pinochet to return to Chile".
Tory leader William Hague said the ruling was "a sad day for democracy. The handling of this case has soured relations with Chile and destabilised their democracy".
Outside Parliament and outside the Wentworth estate in Surrey where Pinochet is under armed police guard, jubilant demonstrators danced after hearing the outcome, while others broke down in tears and hugged each other.