The decision is the latest in a back-and-forth battle over aircraft subsidies, which has been going on across the Atlantic for over a decade.
In particular, today's findings come off the back of a complaint made by the US that the EU had not removed inconsistencies the WTO had previously found, even though it said it had done so in late 2011.
US trade official Michael Froman called the WTO's report a "sweeping victory", adding: "We expect the EU, Germany, France, the United Kingdom, and Spain – some of our closest trading partners – to respect WTO rules. We call on them to end subsidised financing of Airbus immediately."
The European Commission, on the other hand, issued a statement saying it found certain aspects of the WTO panel's findings to be "unsatisfactory".
Airbus said in a statement that it wanted "common sense to prevail: these disputes can only end in a balanced, mutual agreement as we have said from the start. It is vital to create a level playing field for all players in this industry with an agreed global set of rules for government support".
Meanwhile, US-based rival aircraft maker Boeing has chimed in to add the ruling provides the US with a platform to seek up to $10bn in annual retaliatory tariffs on EU imports.
"[This] historic ruling finally holds the EU and Airbus to account for their flouting of global trade rules," said Dennis Muilenburg, Boeing chairman, president and chief executive.
However, the WTO is still to rule on a similar complaint that Boeing too benefits from billions of dollars in tax breaks.
Both the EU and the US have the right to appeal today's decision.