The 8-0 decision left open the possibility for McDonnell to be retried, but in the meantime, his conviction was vacated.
McDonnell, once a rising star in Republican politics, was convicted on federal corruption charges in 2014. He was found guilty of violating the law when he received, gifts, money and loans from Jonnie R. Williams, the CEO of a Virginia-based company, in exchange for official acts seen as favorable to Williams and his business.
The case centered around the question of what constitutes the scope of an "official action" under federal corruption law.
Writing for the court, Chief Justice John Roberts set a clear definition of the term and how it can be used in corruption convictions.
"In sum, an 'official act' is a decision or action on a 'question, matter, cause, suit, proceeding or controversy," Roberts wrote. "Setting up a meeting, talking to another official, or organizing an event (or agreeing to do so) -- without more -- does not fit that definition of an official act."
He also said that political corruption can still be prosecuted by the government, and noted that McDonnell's actions were "distasteful."
"There is no doubt that this case is distasteful; it may be worse than that," Roberts wrote. "But our concern is not with tawdry tales of Ferraris, Rolexes, and ball gowns. It is instead with the broader legal implications of the government's boundless interpretation of the federal bribery statute. A more limited interpretation of the term 'official act' leaves ample room for prosecuting corruption, while comporting with the text of the statute and the precedent of this court."
The impact should extend far beyond McDonnell's conviction, said Steve Vladeck, CNN contributor and professor of law at American University Washington College of Law.
"Today's ruling should clarify -- and dramatically narrow --the scope of federal anti-corruption law, and could open the door to challenges from a number of other former public officials convicted under these federal laws, including Gov. McDonnell's wife, Maureen, former Illinois Gov. Rod Blagojevich, and others."
McDonnell on Monday issued a statement expressing his "heartfelt gratitude to the justices of the United States Supreme Court for the time and attention they have given to the law in my case."
He added: "From the outset, I strongly asserted my innocence before God and under the law. I have not, and would not, betray the sacred trust the people of Virginia bestowed upon me during 22 years in elected office."
A group of his supporters also held a news conference with reporters hailing the ruling, citing a diverse range of legal voices that expressed concern with the broadness of the law.
Former Virginia Attorney General Andrew Miller, who served in the 1970s, said he was frustrated after oral arguments when coverage of the justice's skepticism for the statute was characterized as "'the Supreme Court gets ready to legalize corruption.'"
"It is total nonsense," Miller said. "The problem instead are the statutes enacted by the Congress, which utilize a vague definition of prohibited conduct giving prosecutors an unchecked authority to go after whomever they choose to go after for doing nothing more than routine constituent services."
"Despite what the federal prosecutor wanted the jury and the public to believe, not everything an elected official does is an official act," said Virginia state Sen. Bill Stanley. "Sometimes a luncheon is just a luncheon."
In a statement, Maureen McDonnell's attorney, William A. Burck of Quinn Emanuel Urquhart & Sullivan LLP, said he believe his client's conviction will soon be thrown out. "Mrs. McDonnell, like her husband, was wrongfully convicted," Burck said. "We thank the Supreme Court for unanimously bringing justice back into the picture for the McDonnells."
Fate of Rod Blagojevich, Sheldon Silver
The ruling has the potential to impact several high-profile corruption cases.
Attorneys for Sheldon Silver, the former New York State Assembly speaker who was sentenced
to 12 years in May for taking bribes and kickbacks, said they plan to use the ruling in appeals.
"The Supreme Court's unanimous decision today in the McDonnell case makes clear that federal government has gone too far in prosecuting state officials for conduct that is part of the everyday functioning of those in elected office," attorneys Steven Molo and Joel Cohen said in a joint statement. "The McDonnell decision will be central to Mr. Silver's appeal."
But prosecutors in that case believe their conviction would be upheld even with the court ruling.
"While we are reviewing the McDonnell decision, the official actions that led to the convictions of Sheldon Silver and Dean Skelos fall squarely within the definition set forth by the Supreme Court today," said Southern District of New York U.S. Attorney's Office spokesman James M. Margolin.
In the case of former Illinois Gov. Rod Blagojevich, a jury found him guilty of charges including attempting to sell the Senate seat vacated by the election of President Barack Obama. Though an appeals court last year threw out a handful of his convictions, they upheld others relating to soliciting campaign contributions for naming someone to the empty seat.
Blagojevich is scheduled for a resentencing in August in light of the appeals court decision, and the case may come up, according to his attorney Len Goodman. But the impact of the Supreme Court's ruling may be limited, Goodman said.
"I think that some of the language in it and the concerns about government over-reaching are helpful," Goodman said. "(But) I think that the narrow issue they looked at about the meaning of an official act is not directly on point with our case."
Goodman also expressed frustration that Blagojevich's prison sentence and conviction has been upheld when he's not accused of taking flashy gifts.
"It's ironic that McDonnell -- the Supreme Court said it's 'distasteful.' He was taking Rolex watches and Ferraris," Goodman said. "Blagojevich never did that. He was quite scrupulous. He bought his own clothes, he bought is own Cubs tickets."
Citizens for Responsibility and Ethics in Washington Executive Director Noah Bookbinder blasted the decision, saying it makes it harder to prosecute public officials for corruption. "The Supreme Court essentially just told elected officials that they are free to sell access to their office to the highest bidder," he said. "If you want the government to listen to you, you had better be prepared to pay up."
The government argued that McDonnell received loans, deluxe shopping trips and golf outings and in return used the power of his office to help Williams' company.
McDonnell -- who attended oral arguments with his wife Maureen
-- asked the Supreme Court to reverse his conviction. In 2015, he had been on the verge of reporting to prison for his two-year sentence when the court allowed him to stay out of jail pending his appeal.
McDonnell's lawyers argued that his actions were limited to routine political courtesies and he never put his thumb on a scale by exercising government power on Williams' behalf.
The case centered around the question of what constitutes the scope of an "official action" under federal corruption law -- and at oral arguments, several justices searched for the proper line to draw between the regular activities of a politician and actions that could violate corruption laws.
Noel Francisco, a lawyer for McDonnell, had argued that the lower courts stretched "corruption laws beyond recognition."
He said that the government's position in the case puts "every federal, state and local official nationwide in its prosecutorial crosshairs."
At oral arguments, justices also questioned the scope of federal laws prosecutors used to convict McDonnell and struggled with where the line is between routine political action and the "official act" that would trigger corruption statutes.
Roberts pointed out that former White House counsels on both sides of the aisle argued in a brief that if the lower court decision is upheld it would, "cripple the ability of elected officials to fulfill their role in a representative democracy."
The skepticism cut across the bench, with more liberal Justice Stephen Breyer being the most vigorous questioner of the government and expressing concern that the Justice Department could wield "enormous power" and that prosecutors could be "overly zealous." He also repeatedly stressed concern that such laws could put at risk "behavior that is common."