Thailand's Constitutional Court ruled on Wednesday that legislation allocating 2 trillion baht ($62 billion) for government infrastructure projects was illegal and violated the constitution.
The infrastructure projects had been expected to support the economy from last year but were held up by the court case.
The ruling is an additional blow to the economic outlook this year, with prospects already dimmed by protracted anti-government protests that have hurt business confidence and tourism.
The government had wanted to fund the projects off-budget but the opposition had asked the Constitutional Court to decide if that was legal. The upper house Senate passed the bill last year.
"Both the wording and drafting process were unconstitutional," a court official, who declined to be identified, told Reuters.
The planned projects include high-speed railways, highways and mass-transit networks in Bangkok.
The government has planned the 2 trillion baht spending on infrastructure projects between this year and 2020, which would boost growth and investment at a time of tepid global demand.
Even before the latest political unrest, the projects - intended to lift gross domestic product (GDP) by at least one percentage point per year - have been delayed by legal hurdles.
Prime Minister Yingluck Shinawatra posted on Facebook before the ruling that it was pity for the country to lose the opportunity to develop infrastructure systems.
After the ruling, the opposition said it planned to file a petition with the country's anti-corruption agency, seeking the impeachment of Yingluck and the cabinet for breaching the constitution by drafting the bill.