Liberal opposition leader Viktor Yushchenko on Saturday appeared set for victory in the new ballot on 26 December after emerging triumphant from a 12-day "people power" campaign to overturn the results of a presidential election he had hotly disputed.
In the centre of the capital, a boisterous party erupted after Yushchenko told his supporters the court ruling had been a victory for their "orange revolution".
"Ukraine is henceforth a true democratic state," he declared to a crowd on Kiev's Independence Square, where his supporters, clad in his orange campaign colours, have thronged for the past 12 days.
Thousands of his jubilant supporters roamed Kiev late into the night, chanting his name, blowing horns, hammering on metal drums and dancing to music from loudspeakers in a deafening carnival atmosphere.
Eye on president
Akram Khuzam, Aljazeera's correspondent in Kiev, reports that the the supreme court's decision has put the political authority of Prime Minister Victor Yanukovich and President Leonid Kuchma to tough test.
Kuchma had said on the eve of the court's deliberation that there was no need to resort to a third round as this would be illegal, a position subsequently backed by Russian President Vladimir Putin.
Predictably, Ukrainains are now eagerly waiting for the president's response to the judiciary's decision, according to Akram Khuzam.
With the opposition likely to head for the eastern areas to woo voters, Aljazeera's correspondent reported that the Ukrainian parliament held an emergency session on Saturday and planned to hold another session on Sunday, to prepare lists of the central election committee in accordance with the top court's 26 December repoll decision.
Akram Khuzam reports that, as before, a highly contentious issue is rigging, which was evident in the second round of the disputed election.
Some political observers have cast doubt on parliament's ability to prevent fraudulent voting in the third round too, considering that the fate of the present government rests on its outcome.
If the president rejects the top court's recommendation using his constitutional power, it will certainly take Ukrainians by surprise.
For, he would be forced to declare a state of emergency in what would be reminiscent of the Romanian revolution. Of course, in the process the president would be endangering his reputation, family and ultimately himself, Akram Khuzam said.
The crisis, following a bitter November election battle between the Western-oriented Yushchenko and Moscow-backed Prime Minister Viktor Yanukovich, plunged the ex-Soviet state into turmoil and set Russia at odds with the West.
The election dispute has plunged
Ukrainian politics into turmoil
Supreme court judges, after five days of deliberations that had kept Ukraine on tenterhooks, agreed with Yusshchenko's allegations that the 21 November vote, officially handed to Yanukovich, had been rigged.
It said the second round vote between the two candidates should be run again on 26 December.
Parliament was scheduled on Saturday to get down to work to amend laws to provide a legal framework for the new round. Deputies were also to start putting together a new government.
The court ruling was a crushing defeat for Yanukovich, bereft of a power base since being sacked by parliament on Wednesday. It also placed a question mark over his sponsor, outgoing President Leonid Kuchma.
It dealt a slap in the face to Russian President Vladimir Putin, who only on Thursday met Kuchma and supported him in opposing a repeat of the run-off. Putin had campaigned for Yanukovich.
Challenger Yushchenko: Ukraine
is a true democratic state
Washington and Brussels immediately welcomed the court ruling on Friday.
"The court's decision is an important step in moving towards a peaceful, democratic resolution that reflects the will of the people," White House spokesman Scott McClellan said.
EU External Relations Commissioner Benita Ferrero-Waldner said: "I welcome this independent decision which opens the way for a repeat of the second round of the election that can fully reflect the will of the Ukrainian people."
The reaction from Ukraine's powerful eastern neighbour was altogether less sanguine. On Friday the Russian parliament slammed Europe's "destructive" influence in Ukraine and itself called for a completely new presidential election instead of the second-round re-run ordered by the court.
"The court's decision is an important step in moving toward a peaceful, democratic resolution that reflects the will of the
White House spokesman
Russia's State Duma adopted a scathing resolution condemning western Europe for its support of opposition demands.
It specifically targeted the European Union, the European Parliament and the Organisation for Security and Cooperation in Europe - a troika (triumvirate) that Russia has come to view in recent weeks as posing an immediate threat to its national interests.
The Duma said Europe's position "is, de facto, pushing a radicalised portion of the Ukrainian population towards dangerous actions" that could result in the breakup of the country and endanger the continent.
More than a dozen of Ukraine's Russian-speaking regions - which have a heavy concentration of the country's main industries and make up the majority of its 48 million strong population - had threatened to stage referendums on autonomy should Yushchenko ever rise to power.
Russian president Vladimir Putin
is unhappy with the court ruling
Russia's Duma warned of a doomsday scenario where the strategic nation that serves as a vital bridge between Russia and Western Europe splinters into pieces and economic chaos.
"This will have the most negative consequences not only for Ukraine but for Russia, all of Europe and for the international community as a whole," the State Duma lower house of parliament said in the resolution that was adopted in a 415 to eight vote.