The verdict brings a long-awaited reckoning to relatives of the up to 40,000 people killed and many more kidnapped, raped or tortured under his 1982-1990 rule as president of Chad.
Habré was found guilty of war crimes, crimes against humanity, rape, forced slavery, and kidnapping, said the president of the court Gberdao Gustave Kam, sentencing him to life in jail. His time would be served in a yet to be determined location.
On Paris Live PM, RFI's correspondent Sheriff Bojang Jr reports from Dakar
Habré raised his arms into the air on hearing the verdict, shouting "Down with Françafrique!" referring to the term used for France's continuing influence on its former colonies.
Victims groups who had travelled to Dakar to hear the verdict were visibly moved by a judgment that comes a quarter century after the abuses they suffered.
"The feeling is one of complete satisfaction," said Clement Abeifouta, president of a Habré survivors association.
"It's the crowning achievement of a long and hard fight against impunity. Today Africa has won. We say thank you to Senegal and to Africa for judging Africa," he added.
The case was heard by the CAE (Chambres africaines extraordinaires) special tribunal set up by the African Union under a deal with Senegal, and is the first time a country has prosecuted a former leader of another nation for rights abuses.
In the Chadian capital, N'Djamena, up to 250 victims and their supporters gathered to watch the trial on television at their group's headquarters.
Women screamed with joy as the verdict was read out, embracing one another and shouting "We won!", before taking to the streets and blocking traffic as they spread the news.
"This is a victory for the Chadian people against impunity and injustice, never again," said Jean Noyama, head of a victims association.
The former leader has 15 days to appeal the sentence.