Stephen Cooper, operator of a Web site called MP3s4free.net, was found guilty of copyright infringement by Federal Court Justice Brian Tamberlin.
Although Cooper didn't host pirated recordings per se, the court found he breached the law by creating hyperlinks to sites that had infringing sound recordings.
This is the first such judgement against hyperlinking in Australia.
Tamberlin found against all other respondents in the case, namely ISP Comcen, its employee Chris Takoushis, Comcen's parent company E-Talk Communications, and its director Liam Bal.
In October 2003, the record companies, which included Universal Music, Sony, Warner and EMI, alleged that Cooper cooperated with Bal and Takoushis to increase traffic to the ISP, and boost advertising revenue.
Subsequently, the court was told Cooper was unaware he may have infringed copyright law, while E-Talk and Comcen argued they didn't know of Cooper's actions.
In handing down his judgement today, Tamberlin said: "I am satisfied there has been infringement of copyright.
"I won't make formal orders as yet. But since there's been infringements ... the respondents must pay the applicants' costs."
Outside the Sydney court, Music Industry Piracy Investigations general manager Michael Kerin said the verdict sent a strong message to ISPs.
"This is a very significant blow in the war against piracy.
"The court has found against all the respondents. It sends the message that ISPs who involve themselves in copyright infringement can be found guilty.
"The verdict showed that employees of ISPs who engage in piracy can be seen in the eyes of the court as guilty," Kerin said.
Cooper was not present in court. His legal counsel, Bev Stevens, said the verdict was "extremely disappointing".
The parties will only be required to pay costs -- which will be decided in 14 days once the music industry serves short minutes of orders in reponse to the judgement.