Millions of passengers were unable to return home as flights were cancelled when an Icelandic volcano erupted in April 2010, leaving the airspace thick with ash.
Denise McDonagh, from Dublin, was left stranded in Portugal for seven days because of the ash cloud.
Ms McDonagh took an action against Ryanair after they refused to pay the €1,129 or £900 costs for accommodation, meals and transport for her time stranded.
But the European Court of Justice has ruled that under EU law, an air carrier must provide care to passengers whose flight has been cancelled due to circumstances such as those following the eruption of the volcano.
"The court responds, first that EU law does not recognise a separate category or 'particularly extraordinary' events, beyond 'extraordinary circumstances', which would lead to the air carrier being exempted from all its obligations under the regulation, including those to provide care," a statement said.
The court ruled the airliner had an obligation to take care of passengers for the time they wait to be rerouted and that if they fail to comply the passenger should be reimbursed for any necessary expenses.
Caroline Curneen of the European Consumer Centre said the ruling is a major victory for airline users.
"The decision will clarify that the airlines remain responsible for providing care and assistance for their passengers in times of natural disaster and difficult weather conditions," she explained.
"So airlines will be obliged to find hotels and meal vouchers for passengers who are stranded, but if passengers are in a situation where assistance isn't providing they should keep receipts and seek reimbursement from the airline."
Ryanair regrets the decision of the European Court which now allows passengers to claim for flight delays which are clearly and unambiguously outside of an airline's control.
Ryanair has said it paid out €26.1m (£22m) to stranded passengers but it has refused many claims, citing their "excessive" cost.
The court did rule however, that the costs of reimbursing passengers could lead to higher ticket prices.
Gillian Edwards from the Association of British Travel Agents added: "Another thing that has come out of this ruling is that EU is looking into whether there should be a cap on how much food and drink, how much expenses should be covered by the airlines."
Responding to the ruling, Ryanair warned that a hike in ticket prices was likely as airlines were being made the "insurer of last resort" by the ruling.
"When governments closed large swathes of European airspace unnecessarily in response to non-existent 'ash clouds' over Ireland, the UK and continental Europe in 2010, the travel insurance companies escaped liability by claiming it was an 'act of God'," a statement said.
Ryanair boss Michael O'Leary described the decision as "crazy" and compensation culture "running riot".
"Somebody who has paid us fifty quid to travel to the Canaries, who may be stuck there for two weeks, two months, six months, will now sue the airlines and you will have airlines going out of business, and the ones who stay in business will be putting up the air fares to recover these crazy claims," he said.
"You can't expect us to be providing compensation for the world and his mother when we are prevented from flying."