A new election will now be held on July 2.
The Constitutional Court in February cited “widespread, systematic and grave” irregularities when it annulled the vote that returned Mutharika to power in the southern African nation last May.
Mutharika and the electoral commission later appealed the Constitutional Court decision.
In its judgment on Friday, the Supreme Court said: “The various breaches undermined the duties of the Malawi Electoral Commission and grossly undermined rights of voters. None of the candidates obtained a majority.”
It added that the electoral commission should not have appealed, as doing so showed it was taking sides.
Malawi is dependent on foreign aid and is frequently beset by drought which threatens the lives of thousands of people.
Former law professor Mutharika, president since 2014, oversaw infrastructure improvements and a slowdown in inflation in his first five-year term, but critics accuse him of failing to tackle corruption.