The decision means prior recorded witness statements cannot be used by prosecutors at the International Criminal Court (ICC) in this case.
Key witnesses in the case changed their statements, which prosecutors said was due to intimidation and bribery.
Mr Ruto, who is being tried over unrest that followed 2007 elections, denies charges of crimes against humanity.
About 1,200 people were killed in the violence.
The latest ruling overturns a previous decision by judges to allow five of the witnesses’ original statements to be included because they were convinced the witnesses had been interfered with.
This use of prior testimony falls under Rule 68 of the Rome Statute, which set up the ICC.
But William Ruto’s defence team argued this was unfair because changes to the rule were brought in after the case against him and his fellow defendant, the journalist Joshua arap Sang, had started.
“The prior-recorded testimony was delivered without an opportunity for the accused to cross-examine the witnesses,” said presiding judge Piotr Hofmanski.
Mr Ruto is one of the most senior government officials to be tried by The Hague-based court since its formation more than a decade ago.
In 2014, the ICC dropped similar charges against Kenyan President Uhuru Kenyatta, alleging that witnesses had been intimidated to make them change their testimony.
Mr Ruto and Mr Kenyatta were on opposite sides of the 2007 election, but formed an alliance that won the 2013 election.
In January 2015, a key witness for Mr Ruto was found dead in Kenya after reportedly being abducted a few days earlier.
The ICC said Meshack Yebei had been offered protection in a safe location but had returned home.
Some 600,000 people fled their homes in the 2007 conflict – the worst in Kenya since independence.