Michael Harte, chief operations and technology officer at Barclays bank, has 60 days to pay the €2.94 million he offered for Budelli, part of the Maddalena island group, after winning an appeal at a court in Olbia, Sardinia, Il Fatto Quotidiano reported.
Harte bought the island at auction in October 2013 after the previous owner, a property firm in Milan, went bankrupt.
But this set in motion a protest by local politicians, who appealed to the Italian government to bring the uninhabited paradise back under state control.
A petition containing more than 85,000 signatures was signed and Italy's Senate last year reportedly allocated some €3 million after a Sardinia judge ruled that the government had a preemptive right to buy the island, famous for its pink sandy beaches, back from Harte.
But Harte appealed, raising concerns about the cash-strapped government's ability to preserve the island.
The Tempio Pausania court on Friday finally ruled in his favour, saying that the island, currently under the custody of Maddalena archipelago National Park Authority, must now be handed over.
The banker is said to have been “in love with the Maddalena archipelago for decades” and plans to draw up conservation plans with the aim of protecting its ecosystem.
“My plan is to move forward with environmental initiatives, collaborate with the [national] park authority and make other resources available so that this paradise becomes known to the whole world,” Harte was quoted by Il Fatto Quotidiano as saying.
Mauro Pili, the leader of Unidos, a centre-right party and Sardinia's ex-president, said such a “serious” decision to let a "jewel” fall back into private hands was unprecedented.
“But the decision of the bankruptcy court is final and erases all hope...now the only path that remains is a government decree, which has already been called for.”