The party was found to have violated laws governing political parties by accepting a loan worth about US$6 million from its young tycoon leader, Thanathorn Juangroongruangkit, to fund an electoral campaign.
Last year's poll ended five years of military rule, and saw the emergence in June last year of a coalition led by Prime Minister Prime Minister Prayuth Chan-ocha, the former junta leader who first took power in a 2014 coup.
Thanathorn, the heir to an auto parts fortune, addressed supporters on Friday and encouraged them to keep fighting.
The Future Forward Party was dissolved over the lending of 191 million baht ($6 million) by its leader Thanathorn Jungroongruangkit to his election campaign in violation of a law on political parties.
He said a Future Forward Group would be established to continue promoting the party's ideas on issues such as social welfare, military reform and local politics.
The party and Mr Thanathorn have denied any wrongdoing, with their main defence that the law made no mention of loans.
"This is the time to prove they can't destroy us. You can dissolve the party but you cannot dissolve its people", he said.
Most of the party's MPs will retain their seats and can form a new party, but the ban on its leaders will reduce the Opposition's votes and its ability to block Prayuth's agenda.
The move against Future Forward has triggered criticism inside Thailand as well.
"Thailand's friends overseas should denounce this jarring setback to a return to political pluralism and democratic rule", Adams said.
Ahead of last year's general election, the court dissolved Thai Raksa Chart, another Thaksin-backed party. "Political space in Thailand should remain open", the European Union said in a statement Friday, adding Thai authorities should ensure that all legitimately elected MPs should be able to keep fulfilling their parliamentary mandates.
The court decision is just one more example of governments in the Association of Southeast Asian Nations abusing the law to silence dissent, according to the ASEAN Parliamentarians for Human Rights advocacy group.
A decision by Thailand's Constitutional Court to ban the opposition Future Forward Party has dented optimism that democracy was returning to the military-run country. The court also ordered confiscation from the party of 181.3 million baht (US$5.8 million), the amount of the loan considered to exceed legal limits.
"The penalty seems wholly disproportionate to the infraction, and when you look at the huge number of cases brought against the Future Forward Party and its members since it was founded, it is hard not to question whether they are being singled out because they pose a threat to the political establishment's grip on power", said Abel Da Silva, a Timor-Leste MP who also serves as member of APHR.
The political ban means Mr Thanathorn and the party executives can not join a party or set up a new one for 10 years.
"The White House has generally wanted to push a policy of boosting ties with Thailand, and I think - while Future Forward's ban might lead to some consternation in Congress and some in the administration - it will not stop arms sales", he said.