The verdict brings a long-awaited reckoning to families of the up to 40,000 people killed and the many kidnapped, raped or tortured under his 1982-1990 rule as president of Chad.
"Hissene Habre, this court finds you guilty of crimes against humanity, rape, forced slavery, and kidnapping," as well as war crimes, said Gberdao Gustave Kam, Burkinabe president of the Extraordinary African Chambers (CAE) court.
"The court condemns you to life in prison," Kam added, giving Habre 15 days to appeal the sentence.
Habre raised his arms into the air on hearing the verdict, shouting "Down with France-afrique!" referring to the term used for France's continuing influence on its former colonies.
Victims groups who had travelled to Dakar to hear the verdict were visibly moved by a judgement that comes a quarter century after the abuses they suffered.
"The feeling is one of complete satisfaction," said Clement Abeifouta, president of a Habre survivors association.
"It's the crowning achievement of a long and hard fight against impunity. Today Africa has won. We say thank you to Senegal and to Africa for judging Africa," he added.
The case was heard by the CAE special tribunal set up by the African Union under a deal with Senegal, and is the first time a country has prosecuted a former leader of another nation for rights abuses.
Reed Brody, a lawyer for Human Rights Watch who has spent the last 15 years working with victims to bring Habre to justice, said the conviction was a warning to other despots.
"This verdict sends a powerful message that the days when tyrants could brutalise their people, pillage their treasury and escape abroad to a life of luxury are coming to an end," Reed said in a statement.
"Today will be carved into history as the day that a band of unrelenting survivors brought their dictator to justice."
'A powerful message'
Known as a skilled desert warrior often in combat fatigues to fit the role, Habre fled to Senegal after his 1990 ouster by Chad's current President Idriss Deby.
Witnesses recounted the horror of life in Chad's prisons, describing in graphic detail abusive and often deadly punishments inflicted by Habre's feared secret police, the Documentation and Security Directorate (DDS).
Victims were subject to electric shocks and waterboarding while some had gas sprayed in their eyes or spice rubbed into their genitals, the court heard.
Habre's defence team unsuccessfully sought to cast doubt on the prosecution argument that their client was an all-knowing, all-powerful head of the DDS, suggesting he may have been unaware of abuses on the ground.
For more than 20 years, the former dictator lived freely in an upmarket Dakar suburb with his wife and children, swapping his military garb for white robes and a cap.
He declined to address the court throughout the 10-month trial, refusing to recognise its authority.
"What we have seen today is not justice. It is a crime against Africa," said Mahamat Togoi, part of a Habre supporters group. "It's the dirty work of mercenaries in the pay of France-afrique."
Amnesty International West Africa researcher Gaetan Mootoo said the verdict would serve as a guiding light for those living in repressive regimes around the world.
"It is moments like these that other victims around the world can draw on in darker times when justice appears beyond reach. It will nourish them with hope and give them strength to fight for what is right," Mootoo said in a statement. – Malick Rokhy BA, Agence France-Presse / Rappler.com