Odinga, a longtime opposition candidate and the son of Kenya's first vice president, had unsuccessfully challenged the results of the 2013 vote that Kenyatta won.
The judge said the election board "failed, neglected or refused to conduct the presidential election in a manner consistent with the dictates of the constitution". "We do not have faith that they can conduct a credible election", he said.
"This is a historic day for the people of Kenya and by extension for the people of the continent of Africa", said Odinga after the court's announcement.
The court ruled a repeat vote after canceling the election results, the Kenya Today outlet reported.
"For the first time we have got justice".
He said his IEBC will make make internal changes to staff ahead of the fresh presidential election. The court blamed the Independent Electoral and Boundaries Commission for the irregularities.
The two days of court hearing concluded Tuesday night with the presentation of a report by a Supreme Court team of information technology experts, which showed the country's electoral body failed to comply with the technology rules and regulations when it conducted the August 8 presidential polls.
The electoral body had previously declared Kenyatta the victor after garnering 54 percent of the votes cast.More news: Mumbai Building Collapse Kills At Least Seven
Around 1,200 people were killed and 600,000 displaced due to violence after Odinga lost an election in 2007 against Mwai Kibaki, according to Reuters.
In Burma, Elgeyo Marakwet Senator Kipchumba Murkomen delivered a veiled threat on the Supreme Court.
The Chief Justice said the verdict was backed by four of the six Supreme Court judges.
Citing irregularities, the Supreme Court said a new poll should be held within 60 days.
"Those commissioners must go".
He said the decision of the court, which annuls the results of that country's August 8 presidential polls, serves as a shining example to other African countries.
Odinga's lawyer, however, had alleged that some 5 million votes were marred by discrepancies and said that the forms used to record results lacked key security features such as watermarks and the necessary stamps and signatures.
Odinga called for the election commission to be disbanded.