The Government's anti-terror policy was dealt a second massive blow as the courts forced the Home Office to abandon its deportation case against 12 other terror suspects.
Home Office minister Tony McNulty said Qatada would not be released from jail, and pledged to appeal against the ruling.
In a separate case, two Libyans known only as AS and DD won their appeals against deportation.
The decision led the Home Office to drop the deportation case against them and 10 other Libyans suspected of terrorism.
"We have already taken steps to protect the public," the Home Office spokesman said.
It is believed that AS and DD, who were previously on bail from SIAC, have now been handed control orders.
Other steps - including further control orders - have been imposed on the other 10 Libyans, it is understood.
The development is highly damaging to the Government's policy of seeking "memoranda of understanding" (MOUs) with foreign countries to deport terror suspects.
The so-called MOUs are designed to give reassurance that countries with poor human rights records will not torture or ill-treat anyone returned to their soil.
The ruling in the case of AS and DD leaves the MOU with Libya - signed in October 2005 - effectively in tatters.
Qatada has been convicted in his absence in Jordan of involvement with terror attacks in 1998, and of plotting to plant bombs at the Millennium.
The radical cleric once called on British Muslims to martyr themselves, and tapes of his sermons were found in a flat in Germany used by some of the September 11 hijackers.
Previously, the Special Immigration Appeals Commission (Siac) dismissed Qatada's appeal against deportation to Jordan on the grounds that his human rights would not be breached because Amman had signed an MOU.
Lord Justice Buxton, giving the ruling of the panel of judges, concluded that because of the issue of evidence obtained by torture in Jordan, Siac had misdirected itself in law and its decision could not stand.
Home Office minister Mr McNulty said: "I am pleased that the courts dismissed all but one of Abu Qatada's reasons for appeal.
"We are seeking to overturn that point, and I believe that we will be able to secure his deportation to Jordan and we will push for it as soon as possible.
"In the meantime, he remains behind bars."
On the judgment in the cases of the Libyans AS and DD, the minister said: "The Government's top objective is to keep the public safe and I am disappointed that the courts have found that deportations to Libya can't go ahead for now.
"We will continue to push for deportations for people who pose a risk to national security.
"In the meantime, we will take all necessary steps to protect the public."
Siac previously found the Libyan men faced a risk of ill-treatment, including torture, if they were returned to Libya.
The Home Office argued on appeal that Siac applied a wrong test to the degree of risk faced by the men if deported, and did not give sufficient weight to the evidence that Libya would abide by the terms of the MOU.
Today a panel of three senior judges headed by the Master of the Rolls, Sir Anthony Clarke, said it was agreed that the pair were a threat to national security with links to al Qaida.
Sir Anthony, dismissing the Home Office appeal, said: "As we see it, Siac fully understood and sought to apply the correct test.
"Its responsibility was to consider the many pieces of evidence in a complex picture and to decide whether there were substantial grounds for believing that there was a real risk that the respondents would be tortured some time after their return to Libya, notwithstanding the terms of the MOU."
Alex Gask, of civil rights group Liberty, said: "Deporting people to face torture undermines fundamental democratic values and cannot be allowed, regardless of the paper promises from Governments that are known to practise torture."
Julia Hall, of international civil rights group Human Rights Watch, said: "These cases show that the British Government should stop trying to deport people to countries whose justice systems are deeply tainted by torture and other abuses.
"In the (Qatada) case, notably, the court was right to ignore the Jordanian government's fair trial promises, and find that a trial would likely be tainted by torture."
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