Mukhlas, alias Ali Gufron, shouted "Allahu Akbar" (God is great) as the verdict was announced on Thursday .
He was the fourth key suspect to be convicted for the 12 October, 2002 bomb attacks and the third to be sentenced to death. He was accused of overall responsibility for the blasts, which killed 202 people.
"We hereby declare the defendant has been proven legally and convincingly guilty of collectively plotting crimes of terrorism and possession of fire-arms without permission. We impose the death sentence," said presiding judge Tjokorda Rai Suamba.
Mukhlas has remained defiant throughout his trial and refused to cooperate with investigators.
The Denpasar district court sent the first two key suspects, Amrozi, Mukhlas's younger brother, and Imam Samudra, to death row. A third brother, Ali Imron, was given a life sentence after he cooperated with authorities, showed remorse and urged family and followers not to imitate him.
Mukhlas, dressed in white skullcap, grey Muslim shirt, and dark trousers, smiled at reporters as police with automatic rifles escorted him from an armoured vehicle into court at the start of the session.
There were few spectators on hand, but Jan Laczynski, an Australian who has been present at other trials, said in Indonesian as the suspect passed, "Death for you today, Mukhlas."
Australia had the highest number of victims from the blasts.
Mukhlas, like the other key suspects, is charged with plotting, organising and carrying out the bombings in Bali's tourist hub of Kuta, which killed mostly foreign holidaymakers.
Jakarta accuses Mukhlas of being one of JI's top leaders and prosecutors have said he met bin Ladin in 1987 in Afghanistan.
The court has so far convicted 15 people, from more than 30 facing trial, for their roles in the bombings.
During previous sessions of the trial, Mukhlas has not shown Imron's remorse and has accused Western leaders of being the real terrorists.
He retracted his statements to police, saying they were given under duress after he was tortured and stripped.
"I'm only a tiny terrorist, while there are still many big fish out there, like Ariel Sharon, Tony Blair and George Bush," he said last month referring to the Israeli, British and US leaders.
Indonesian authorities blame the Bali attacks on Jamaah Islamiyah (JI), a Southeast Asian militant network with links to al-Qaida.
Jakarta accuses Mukhlas of being one of JI's top leaders and prosecutors have said he met al- Qaida figurehead bin Ladin in 1987 in Afghanistan.
The repentant Imron pleaded on Wednesday for a reduction of his life sentence, in stark contrast to his elder brother. He decided last week not to appeal against the sentence. An appeal by Amrozi was rejected by the court last month.
Imron received a tougher sentence than the 20-year term the prosecutors wanted despite having apologised during his trial and having begged for leniency.