A High Court judge has found former Tory Cabinet minister Andrew Mitchell did call a Downing Street police officer a "pleb".
Mr Justice Mitting said he had reached the "firm conclusion" that the 58-year-old MP used the "politically toxic" word.
Mr Mitchell could now face legal costs of up to £1 million after losing a libel case against The Sun newspaper.
The former chief whip resigned from the Tory-LibDem government in 2012 in the wake of the allegations,
He later admitted he had sworn during a bad-tempered argument over which exit to use.
But he has always denied that he called a policeman on duty that night a "pleb".
Speaking outside court last night, Mr Mitchell, who also served as International Development Secretary in the early years of the Coalition, said he was "bitterly disappointed" with the outcome.
He had sued News Group Newspapers (NGN), which owns The Sun, over a story that said he had branded officers who refused to allow him to cycle through the main vehicle gates in Downing Street "f****** plebs".
The report was based on the account given in a log by PC Toby Rowland.
Announcing his ruling, Mr Justice Mitting said: "For the reasons given, I am satisfied, at least on the balance of probabilities, that Mr Mitchell did speak the words alleged, or something so close to them as to amount to the same, including the politically toxic word pleb."
Later Mr Mitchell said: "This has been a miserable two years. We now need to bring this matter to a close and move on with our lives."
The MP, who resigned a month after the altercation, had denied saying: "Best you learn your f****** place - you don't run this f****** government - you're f****** plebs."
He denied he would ever have called a policeman a pleb - although he admitted he had said: "I thought you lot were supposed to f****** help us".
However, he insisted this comment had not been directed at the officer.
The judge also rejected the claim that there had been collusion between the officers on the gate that night.
He said PC Rowland was "not the sort of man who would have had the wit, imagination or inclination to invent on the spur-of-the-moment an account of what a senior politician had said to him in temper".
After the ruling, PC Rowland said he now hoped that a "line can be drawn and everyone can be left in peace".
Mr Mitchell was ordered to pay interim costs of £300,000 - to be shared between the Police Federation, which funded PC Rowland, and NGN - by January 3.
However, the total bill he faces has yet to be determined. The costs of the entire litigation were unofficially estimated at £3 million by court sources.
In his ruling, the judge said Mr Mitchell had demanded to be let through and had acted in a childish manner.
Stig Abell, managing editor of The Sun, said: "We have always stood by our story and continue to do so.
"We are delighted that the judge has ruled that what we reported about events on Downing Street in the evening in question was the truth and accurate.
"More importantly, today marks a victory for all journalism. We now live in a world where the task of uncovering what goes on in our institutions has never been more difficult.
"It is the job of journalists to shine light into the dark corners of public and political life. "
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