Richard Wealthall has been found guilty of unacceptable professional conduct while head of Terrington St Clement high near King's Lynn, Norfolk.
England's General Teaching Council proved five allegations against him, including bullying, nepotism, using school funds to support family fundraising activities, using the school mobile telephone for personal calls and failing to report details of staff turnover to governors.
Barbara Hibbert, chair of the disciplinary hearing, said Mr Wealthall allowed his personal life to affect him as he employed his wife, daughter, son-in-law and two family friends. A similar allegation that he gave a job to Tessa Mountain, with whom he is alleged to have had an affair, was not proven.
At an earlier hearing Mr Wealthall admitted embracing Mrs Mountain on a railway platform but said: "We met each other, and as friends do, I believe I put my arm around her shoulder and said 'Hello'."
He denied having an affair with Mrs Mountain, who was the head of English at the 580-pupil school.
The disciplinary hearing in Birmingham found that Mr Wealthall, 60, had used "bullying and intimidating behaviour".
"It was an extremely autocratic and domineering style: such an atmosphere is not capable of allowing a school to thrive," said Ms Hibbert.
The disciplinary hearing found it unacceptable that he had used pound;500 of school funds to help a charity that his daughter supported.
Further allegations - one of failing to inform governors regarding the use of resources, and another of failing to follow up a school assets and premises survey - were not proven.
Mr Wealthall was presented with an award by Tony Blair in 2000, after the proportion of GCSE grades A*-C at St Clement's jumped from 27 per cent in 1996 to 58 per cent in 1999.
When the disciplinary hearing opened in April 2005, David Harwood, former chairman of the school's governing body, gave evidence about allegations of Mr Wealthall's behaviour towards staff. "Members of staff were reduced to tears during meetings," he said. "He would overrule decisions made by them in front of other members of staff."
Last week Nick Butt, a former chairman of the personnel committee and former vice-chairman of governors at the school, told the hearing that Mr Wealthall treated all staff fairly. He described Mr Wealthall's approach to teaching as old-fashioned and added: "He had strong and decisive leadership and was intolerant of sloppiness and laziness. I found his approach effective. He didn't bully but he made his views known."
Mr Wealthall, who has retired and lives in the south of France, denied all of the allegations.
Simon Thomas, his lawyer, said: "Mr Wealthall accepts the decision of the committee and regrets that it has appeared he has upset valued former colleagues."
Mr Wealthall, who has been told he may continue to teach but not run a school, has the right of appeal.