Ruling in a case brought by environmental groups, Justice James Russell says the environmental assessment for the proposed expansion of the Darlington nuclear plant fell short.
Russell says the assessment should have examined the environmental effects of radioactive fuel waste, a Fukushima-type accident and hazardous emissions.
As a result of the decision, the whole project is stalled until a panel can redo the assessment.
Ontario Power Generation's plan to expand Darlington has been in the works since 2006 and would have seen up to four new reactors built.
Environmentalists welcomed the ruling.
"This is a win for Canadians' right to meaningfully participate in environmental reviews and understand the risks of nuclear power," said Theresa McClenaghan, executive director of the Canadian Environmental Law Association.
The group was part of the suit, along with Lake Ontario Waterkeeper, Northwatch and Greenpeace.
"This is a common sense ruling," said Shawn-Patrick Stensil of Greenpeace. "It boggles the mind that the federal authorities approved new reactors without first considering the environmental effects of radioactive waste and reactor accidents."
The Ontario government decided last October to suspend its reactor plans. But the ruling means that the project cannot be revived without more assessment.
"The Federal Court has confirmed that federal authorities must do more than simply kick the tires before approving new nuclear reactors," said lawyer Justin Duncan.
"Fully assessing radioactive waste, major accidents, and hazardous emissions is essential to protecting the health of Ontarians."