Thaci, 58, was sentenced to 25 years in prison for crimes committed as top commander of the ethnic Albanian Kosovo Liberation Army (KLA) during the territory's violent break from Serbia in the 1990s.
The tribunal said he was guilty of the murder of 96 political opponents and perceived collaborators with Serbian security forces by Kosovo Liberation Army forces during the conflict.
He was also convicted for the arbitrary illegal detention of 385 people, torture of 303 people and cruel treatment of 49 people.
None of the victims were active participants in hostilities at the time the crimes were committed, the court said on Wednesday.
The court said Thaci had actively taken part in and encouraged crimes as part of a joint criminal enterprise with a common plan.
"The plan was as simple as it was harmful. In particular, it entailed: setting up detention facilities in all areas controlled by the KLA, identifying individuals perceived as opposing the KLA, and arresting and detaining them and, if necessary, killing them," presiding judge Charles Smith said.
Victims were held in inhumane conditions, beaten, kept in tiny cells and not given enough food or medical care, he added.
Thaci, who stood in silence as the judge read out the conviction and the sentence, had denied all charges and can appeal the verdict.
The ruling was closely watched in Kosovo and Serbia, where the legacy of the 1998-99 conflict and Kosovo's 2008 declaration of independence remain a source of tension between ethnic Kosovo Albanians and Serbs.
Thaci remains a revered figure for many Kosovo Albanians, while the tribunal itself is deeply unpopular in Kosovo.
In The Hague, brief scuffles broke out between several hundred Thaci supporters and police when demonstrators tried to walk to the tribunal from a location where they had been listening to an audio live stream of the judgement.
In Pristina, Kosovo's capital, a crowd of hundreds marched across town following the verdict and dozens of riot police were stationed across the city.
"This verdict is shameful. From today, there will be no peace in Kosovo," said Raif Pllana, a former KLA fighter who came out in support of Thaci in central Pristina.
Police said preparations had been made with foreign peacekeeping forces in case protests turned violent.
Albanian Prime Minister Edi Rama criticised the verdict with a picture posted on social media of a circle of barbed wire across a map of Europe and one word: "Unbelievable".
Prosecutors had sought a 45-year sentence against Thaci and three other former top commanders of the KLA.
But the three-judge panel dismissed six charges of crimes against humanity.
They said prosecutors had failed to show these happened as part of widespread or systematic attacks against the civilian population as a whole.
Lawyers for Thaci had argued that the accusations were unfounded and amounted to an attempt to rewrite history.
The Hague-based Kosovo Specialist Chambers was established in 2015 under international pressure to try former KLA fighters for alleged wartime and postwar crimes.
Judges on Wednesday said the trial was held against the backdrop of severe witness intimidation and recalled witnesses who recanted past statements, lied to the court or changed their previous accounts.
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