Referring to reports by Amnesty International (AI) and Human Rights Watch, which described a disturbing situation in Tunisian jails, the human rights court in Strasbourg said Saadi faced ill-treatment if sent back.
The court said regular cases of torture of people accused under the 2003 Prevention of Terrorism Act were documented.
It said the prospect that Saadi might pose a serious threat to the community "did not diminish in any way the risk that he might suffer harm if deported".
Ian Seiderman, AI's senior legal adviser, said: "This judgment should serve as a reminder to all states: not only they are not allowed to commit torture themselves, but they are forbidden from sending anyone to countries where they would be at risk of torture or other ill-treatment.
"In the current climate, where states are backsliding on the absolute prohibition of torture and other ill-treatment, this unanimous ruling of the European Court of Human Rights is a welcome landmark.
"It reaffirms that the measures that states take to protect us all from the threat of terrorism must respect human rights and the rule of law."
Italy has unsuccessfully tried to deport Saadi since 2006.
Saadi was also sentenced by a military court in Tunisia in his absence in 2005 to 20 years in jail for membership of a terrorist organisation and for incitement to terrorism.
He denied both accusations.