The union argued in the high court that education secretary David Blunkett did not have the power to set the standards by which teachers applying for performance-related pay should be judged.
Mr Justice Jackson agreed. He said Mr Blunkett had 'evaded the proper scrutiny' of parliament and the Welsh Assembly. The ruling could mean the end of the system altogether in Wales, where its introduction is following a later timetable to that in England.
It will cause a delay in England, because the process will now have to be subjected to parliamentary scrutiny.
Almost 80% of those teacherz who were eligible applied for the award. They are being assessed by head teachers, using the standards set down by the government, to see if they can 'cross the threshold' from the top of the current basic pay scale.
That would give them an immediate pay rise of£2,000 and access to a higher pay scale which could ultimately see their earnings reach£30,000.
The deputy general secretary of the NUT, Steve Sinnott, said after the earing: 'This is a victory for the supremacy of the law.
'The government has tried to impose a system that teachers didn't want and which did not obey the law. The government saw itself as above the law.
'What it should be doing is listening and talking to the teachers and devising a means whereby teachers are paid properly in accordance with the law.'
The DFEE said it was seeking legal advice on whether to appeal against the judgement.
The government remained committed to introducing the pay reforms, and teachers' rises would be backdated to 1 September.
The union had also challenged an amendment to teachers' existing responsibilities, The Education (School Teachers' Pay and Conditions) (No. 2) Order 2000.
The NUT said the effect of this was that all teachers could be required to 'inform' on colleagues if head teachers asked for their views on whether they merited the pay rise. Again the judge agreed, and quashed the order.
The government had tried to argue that the meaning of the change was only that heads of departments could be asked to assist head teachers.
Meanwhile, Graham Lane, for the Local Government Association, told the Financial Times (July 15, p2: 'We have told the government we will do everything we can to get this show back on the road.'