The suspect, Abd al-Aziz alias Imam Samudra, a 33-year-old computer expert, had been charged with “plotting, organising and carrying out crimes of terror” in relation to the nightclub blasts on 12 October 2002 that killed 202 people, mostly foreign tourists.
Lawyers for Samudra said they would go on appeal against the death sentence.
"Imam Samudra has been clearly proven to have planned a terrorist act, and we hand down the sentence of death," Judge Wayan Sugawa said, giving the court’s ruling on Wednesday in the Indonesian capital Jakarta.
Samudra shouted "God is Great" after the verdict was read, while several people in the courtroom cheered.
Another judge on the five-member panel Ifa Sudewi said there were no mitigating factors. She said Samudra committed "an extraordinary crime and a crime against humanity."
"The element of planning has been legally and convincingly proven," Ifa Sudewi said.
"The defendant is seen as playing a dominant role in the Bali bomb blasts and therefore the judges declare that the defendant is the intellectual actor behind the Bali bomb explosions," Sudewi said.
Samudra denied he gave orders to the
others for the bombings
Sudewi, reading the findings said Samudra had denied giving the other Bali plotters orders.
"But the facts during the trial showed that the defendant had ordered Ali Imron to drive the L-300 van to the location of the target," she said.
The van bomb exploded outside the Sari Club, seconds after a smaller blast at the nearby Paddy's Bar. About 164 of the victims, including 88 Australians, were foreign tourists and 38 were Indonesians.
Investigators believe Samudra is a leading member of al Qaida-linked Jamaah Islamiyah (JI) network, which staged the attack on Western holidaymakers to avenge oppression of Muslims worldwide.
He is the second Bali suspect to be convicted, after Amrozi was sentenced to death on 7 August.
Other key suspects awaiting verdicts in coming weeks are an alleged senior JI operative called Mukhlas, who is said to have authorised Samudra to go ahead with the attack, and Ali Imron, one of the bombmakers.
Amrozi, Mukhlas and Imron are brothers.
Samudra, 33, selected the blast targets and assigned tasks to the bombers as part of his self-declared war against the United States.
"The defendant is seen as playing a dominant role in the Bali bomb blasts and therefore the judges declare that the defendant is the intellectual actor behind the Bali bomb explosions"
Judge Ifa Sudewi
"Let me be the one to die as a martyr and release the others, I'm glad with that," he was shown telling his lawyer in a film footage broadcast on Tuesday night by Australia's Channel Nine network.
"I tell Australians we're not afraid," Samudra was quoted as saying by a translator. "Before 10 years, Australia and America will be destroyed. Please help me God, I'm not afraid."
Samudra, who has said a death sentence will bring him closer to Allah, displayed a chilling indifference throughout his trial to his own fate and that of his victims.
"This war is against America and the world understands that America is conceited, arrogant, savage and brutal," he has said.
"The war against America and its allies is a war against evil, against tyranny and a war against terrorism and this is jihad (holy war) in the path of Allah."
During his trial Samudra sought to play down his role, denying he was the one who picked the targets or gave orders to fellow bombers, but admitting involvement in and responsibility for the blasts.
He expressed only perfunctory regret at the killing of Muslims in Bali, describing it as a "side effect."