Ms Shoesmith, 58, challenged a High Court ruling that cleared regulator Ofsted, former children's secretary Ed Balls and Haringey Council of acting unlawfully.
Speaking after the hearing in central London, Ms Shoesmith smiled and said: 'I'm over the moon. Absolutely thrilled.'
Her lawyers argued that she was the victim of 'procedural unfairness' when she lost her £133,000-a-year post as director of children's services at Haringey Council in north London.
She will now return to the High Court for a compensation hearing and is claiming her right to a full salary and pension payments from the day she was sacked in 2008 to the present day.
Speaking at the G8 summit in France, Prime Minister David Cameron said the Department For Education would launch an appeal.
'We all remember the absolutely appalling case of Baby P and how, as a country, we've got to do right and make sure we are accountable for the terrible mistakes and errors that were made,' he said. Read More
Update: Philip Henson, head of employment at City law firm Bargate Murray, said Ms Shoesmith was likely to receive compensation "approaching, or hitting, the £1m mark, taking into consideration reinstatement of her pension rights."