Nigel Rhodes was fined for driving on Coppergate in York which, along with Lendal Bridge, is barred to general traffic at certain times of day.
But a tribunal found neither road was a bus lane, the signage was inadequate and CCTV evidence insufficient.
City of York Council said it would seek legal advice over the decision.
General traffic is banned from Coppergate between 07:00 and 19:00, and from Lendal Bridge between 10:30 and 17:00.
More than 57,000 drivers have been issued penalty notices since the restrictions were put in place in August as part of a trial which was due to end in February, but has been extended to May.
Mr Rhodes appealed against his £60 fine for "being in a bus lane" at 09:22 BST on 21 August last year.
Adjudicator Stephen Knapp of the independent Traffic Penalty Tribunal said as there were so many exemptions in place buses were "just one" type of vehicle allowed, and "the restriction was not on any reasonable view a bus street".
The Labour-run authority has faced criticism for the scheme, which Liberal Democrat councillor Ann Reid described as an "utter fiasco".
"The ruling supports our concerns that the closure signs were not clear," she said.
"It also confirms that often the only way for drivers to avoid the closure is to do a dangerous U-turn on a narrow road.
"Labour should reopen Lendal Bridge immediately and the cabinet member responsible for the mess should be considering his position."
Darren Richardson, the council's director of city and environment, said: "[We are] seeking independent legal advice.
"We will also be speaking to the Department for Transport, who approved signage used for both schemes.
"The restrictions will remain in place and we would urge drivers to continue to adhere to these."
A council which has raised £1.3m from drivers breaking a traffic ban has "no power" to issue penalties, an adjudicator has ruled.