Supreme Court rescinds voucher system
Governor Jeb Bush regarded the scheme as one of his proudest achievements.
In a 5-2 ruling, the state's highest court said the programme undermined state schools and violated the Florida constitution's requirement of a uniform system of free state education.
Opponents of the voucher programme had argued that it violated the constitutional separation of church and state by giving tax dollars to private religious schools - an argument which a lower court had agreed with. But the Supreme Court did not address that issue.
President Bush's pro-vouchers administration has expressed its disappointment at the ruling.
Margaret Spellings, US education secretary, said the Florida court's decision was a setback for educational accountability and freedom.
"Accountability is only as good as its consequences," she said.
"Florida's Opportunity Scholarship programme holds all schools accountable by turning a monopoly into a marketplace and helping parents to become educated consumers."
Groups opposed to the voucher scheme had included Florida's teachers' union and the state's Parent Teachers Association.
The decision leaves intact two larger Florida schemes, which include 30,000 participating students, but could be used as a legal precedent to challenge these too, supporters say.