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Bruce Trevorrow was awarded damages of 525,000 dollars (448,717 US dollars) in the first such case to have succeeded, the Australian Broadcasting Corporation said.
On Christmas Day in 1957, 13-month-old Trevorrow was taken to hospital with stomach pains.
When he recovered he was put into foster care without his parents knowing.
Despite letters sent by his mother, it was a decade before he was reunited with her.
Trevorrow argued in the South Australian Supreme Court that because of the actions of state authorities he had led a life marked by loss of identity, depression, alcoholism and erratic employment.
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His two brothers and two sisters stayed with their parents and had led successful lives, he said. Thousands of Aboriginal children were removed from their families under ethnic assimilation policies between the 1930s and the 70s.