Walker's administration immediately vowed to appeal the Friday ruling, while unions, which have vigorously fought the law, declared victory. But what the ruling meant for existing public contracts was murky: Unions claimed the ruling meant they could negotiate again, but Walker could seek to keep the law in effect while the legal drama plays out.
The law, a crowning achievement for Walker that made him a national conservative star, took away nearly all collective bargaining rights from most workers and has been in effect for more than a year.
Dane County Circuit Judge Juan Colas ruled that the law violates both the state and U.S. Constitution and is null and void.
In his 27-page ruling, the judge said sections of the law "single out and encumber the rights of those employees who choose union membership and representation solely because of that association and therefore infringe upon the rights of free speech and association guaranteed by both the Wisconsin and United States Constitutions."
Colas also said the law violates the equal protection clause by creating separate classes of workers who are treated differently and unequally.
The ruling applies to all local public workers affected by the law, including teachers and city and county government employees, but not those who work for the state. They were not a party to the lawsuit, which was brought by a Madison teachers union and a Milwaukee public workers union.
Walker issued a statement accusing the judge of being a "liberal activist" who "wants to go backwards and take away the lawmaking responsibilities of the legislature and the governor. We are confident that the state will ultimately prevail in the appeals process."
Wisconsin Department of Justice spokeswoman Dana Brueck said DOJ believes the law is constitutional.
The ruling throws into question changes that have been made in pay, benefits and other work rules in place across the state for city, county and school district workers.
Walker's law, passed in March 2011, only allowed for collective bargaining on wage increases no greater than the rate of inflation. All other issues, including workplace safety, vacation, health benefits, could no longer be bargained for.
The ruling means that local government and schools now must once again bargain over those issues, said Lester Pines, an attorney for Madison Teachers Inc. that brought the case.
"We're back to where we were before the law was enacted," he said.
Pines predicted the case would ultimately be resolved by the state Supreme Court.
"What's going to happen in the interim is unknown," he said.
The state Supreme Court in June 2011 ruled that the law was constitutional after it had been blocked by a different Dane County judge on a challenge over its passage being a violation of open meetings law.
Walker introduced the proposal in February 2011, six weeks after he took office. It resulted in a firestorm of opposition and led to huge protests at the state Capitol that lasted for weeks. All 14 Democratic state senators fled the state to Illinois for three weeks in an ultimately failed attempt to stop the law's passage from the Republican-controlled Legislature.
The law required public workers to pay more for their health insurance and pension benefits at the same time it took away their ability to collectively bargain over those issues. Walker argued the changes were needed to help state and local governments save money at a time Wisconsin faced a $3 billion budget shortfall.
Anger over the law's passage led to an effort to recall Walker from office. More than 930,000 signatures were collected triggering the June recall election. Walker won and became the first governor in U.S. history to survive a recall.
The lawsuit was among several filed against the law.
A coalition of unions filed a federal lawsuit in Madison in June 2011, arguing that the law violated the U.S. Constitution's equal protection clause because it exempted firefighters and police officers. A federal just upheld most of the law in March, but the rulings are under appeal.
Another lawsuit was filed in July 2011 by two unions representing about 2,700 public workers in Madison and Dane County. They also challenged the law on equal protection grounds. The case is pending.
Democrats and unions were ecstatic with Friday's ruling.
"As we have said from day one, Scott Walker's attempt to silence the union men and women of Wisconsin's public sector was an immoral, unjust and illegal power grab," said Phil Neuenfeldt, president of the Wisconsin State AFL-CIO.
The Democratic minority leader in the state Assembly called the ruling a huge victory for workers and free speech.
"This decision will help re-establish the balance between employees and their employers," said Rep. Peter Barca.
Republican Rep. Robin Vos, a staunch supporter of the law and the presumptive next speaker of the Assembly, called the ruling an example of the "arrogance of the judiciary."
"I'm confident it's a single judge out of step with the mainstream," Vos said. He said the law is working "and we'll continue to implement it."
Associated Press writer Todd Richmond contributed to this story.