The country's constitutional court threw out the law on Wednesday but Mr Berlusconi remained defiant in the face mounting pressure from the opposition to step down.
The 72-year-old has suffered a wretched year after his wife's divorce led to wave of allegations being made about his personal life.
Mr Berlusconi has been accused of using prostitutes at his private villas and roundly criticised for attending the birthday parties of teenagers.
The prime minister's supporters have tried to play down the court's ruling claiming the judges are part of a growing plot to remove him from office.
Mr Berlusconi himself released a statement: 'I cannot but respect the response from the constitutional court.'
Speaking in from of his palace in Rome he also declared: 'The constitutional court is a political organ. The trials against me are a farce. Viva Italia and Viva Berlusconi!
'I will go on. We must govern for five years, with or without the law. I never believed because with a constitutional court with 11 left-wing judges, it was impossible that it would be approved.'
Mr Berlusconi could now face a series of criminal trials involving fraud, corruption, tax evasion and bribery.
The most high-profile involves the lawyer David Mills – the estranged husband of the Olympics minister Tessa Jowell – who it is alleged received a $600,000 (£378,000) bribe from Mr Berlusconi to give false evidence in two trials.
Mr Mills has been convicted a handed a four-and-a-half year jail sentence. He is currently appealing.
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