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Kavala, 68, became a symbol of a government crackdown on civil society in Turkey following his arrest in October 2017.
He and others were accused of orchestrating and financing anti-government protests in 2013, which started in Istanbul's Gezi park before spreading across Turkey.
The demonstrations posed the first serious challenge to the rule of Erdogan, who was Turkey's dominant prime minister at the time and became its directly elected president the following year.
Human rights group Amnesty International says prosecutors falsely alleged that the Gezi park protests were an attempt to overthrow the government.
In 2019, the ECHR demanded Kavala's immediate release, describing his detention as arbitrary and politically motivated. Turkey did not implement the ruling.
He was initially acquitted in February 2020 but within hours was rearrested on new charges of being part of a failed military coup in 2016.
His acquittal over the Gezi Park protests was overturned in January 2021, and he was sentenced to life in prison in April 2022 - a conviction now declared "null and void" by the ECHR.
Reacting to the latest ECHR ruling, Amnesty International's Eve Geddie said: "This obstruction of justice must end. Turkey's authorities, including judicial and prosecutorial, must act to free Osman Kavala immediately and unconditionally."
Kavala was born in Paris and educated in the UK. Before being thrust to prominence, he ran a cultural centre.
Erdogan has previously accused Kavala of being an agent of the Hungarian-born US billionaire George Soros.
Turkey has refused to comply with the two previous ECHR rulings on Kavala's case, and it is not clear whether Ankara will implement the court's third binding ruling.
The case remains one of the most serious recent flashpoints between Ankara and Strasbourg.
The Council of Europe oversees how its 46 member states execute ECHR rulings. It has the power to freeze a country's membership or suspend its voting rights if it is found to have seriously violated the rule of law.
Even though Turkey has failed to comply with several key ECHR decisions, it remains a founding member, engages with the system and has not broken ties.
A meeting of the Committee of Ministers in mid-September is likely to prioritise the Kavala case, but it remains to be seen whether it will debate harsh punitive measures.
