Mohamed Himu Islam was awarded $18,800 in damages by the Tokyo District Court against the Nippon Television Network Corporation.
The court said the broadcaster had failed to verify information leaked by police officers and had wrongly stated that he had raised a huge amount of money for al-Qaeda by selling fake prepaid phone cards.
Himu, 36, who lives in Saitama Prefecture, north of Tokyo, said: "I live in Japan with my family, I pay my taxes and I want no trouble, but because I am Muslim I've had nothing but problems.
"The police have links with the media and the media have broadcast this story all over the world.
"I'm on a blacklist everywhere I go because even though I was
released by the police, they still have not cleared my name."
Himu, who has also successfully sued Kyodo News for $14,500, said that by sending information around the world on his detention, Japanese police had infringed upon his human rights.
Since the incident, an application for a visa for Malaysia has been turned down, relatives in Canada, Holland and France have been investigated and his own telecommunications business in Japan faces bankruptcy.
Himu, who is married to a Japanese national and set up a company after arriving in Japan in 1995, was detained at his home in May 2004.
Police were investigating a link to Lionel Dumont, a French national of Algerian descent, who was arrested in Germany in December 2003 on terrorism charges.
Official concern in Japan was heightened by sensationalist reporting by certain sectors of the Japanese media that there was a terrorist cell which was operational and raising funds for al-Qaeda.
Himu had sold Dumont a phone card, which brought him to the attention of the authorities.
Himu said: "I told the police I had no knowledge of al-Qaeda at all. In my mind, it was the police who were acting illegally by arresting me for nothing."
Takashi Furukawa, Himu's lawyer, said his client would probably not sue the police for leaking the information to the media because any suit was very unlikely to be successful.
"It is illegal for an officer to unofficially provide information on a case to a journalist and the media do not reveal their sources, so any suit would simply be met with a denial," he said.
The judge criticised NTV for broadcasting information that could have been shown to be false with a closer examination of the details provided by the police.
In a statement, NTV officials said they are "considering carefully" the court's decision and will make a decision on their next step in the near future.
Kyodo News has appealed the court decision.