The directive entitled member states to retain citizens' telecommunications data for up to 24 months and also allowed police and security agencies to request access to this information, which included emails, phone calls and text messages.
ALDE MEP Sophie in't Veld, an outspoken critic of mass surveillance, said the decision shows that the "European court recognises that the directive is lacking both necessity as well as the appropriate safeguards".
The Dutch deputy added, "I welcome the court's confirmation that this disproportionate data retention measure is in violation with the fundamental rights of European citizens."
She continued, "The necessity of such random data storage remains unclear, as the mandatory assessment of the usefulness of the directive has not taken place.
"Member states have failed to provide any meaningful information on the results of the data retention law.
"This directive confronts companies and governments with great expense and allows for the storage of personal data of innocent Europeans while the purpose of this measure is unclear.
"We should not always rely on the courts to repair unsound laws that are the result of political opportunism"- Sophie in't Veld
"Future laws to combat terrorism must respect our private life and fully enshrine the protection of personal data.
"I am glad the court has struck down the directive," she continued, adding "However, we should not always rely on the courts to repair unsound laws that are the result of political opportunism."
Jan Philipp Albrecht, justice and home affairs spokesperson for the Greens/EFA group, reacted even more positively to the news, hailing the decision as a "major victory for civil rights in Europe".
"The blanket, unjustified collection and retention of telecommunications data in the EU must now stop.
"Highly intrusive data collection not only infringes human rights to privacy and data protection but has also totally failed to lead to any noticeable improvement in law enforcement. The directive is therefore completely disproportionate and has rightly been scrapped by the court.
"[The ECJ ruling is] major victory for civil rights in Europe" - Jan Phillipp Albrecht
"It is disappointing that it had to take such a long time for EU citizens to get legal clarity on this massive breach of constitutional and treaty-based principles."
He went on to condemn the German federal government and the European commission, saying that for them the ruling was "embarrassing". He also criticised them for continuing to "advocate in favour of data retention and other types of unfounded, unjustified blanket surveillance, for example through the air passenger data system".
"At the same time, law enforcement investigations that are founded on an initial suspicion are, due to lack of resources, coming under increasing strain. This policy must be changed immediately. Civil rights are important, throughout Europe," concluded the German MEP.
Sylvie Guillaume, a member of parliament's civil liberties, justice and home affairs committee also welcomed the decision, saying, "This directive has a tremendous impact on fundamental rights.
"The European parliament inquiry into the NSA spying scandal has clearly revealed how several countries had crossed the Rubicon into mass surveillance.
"More than ever, we need the data protection package to be adopted rapidly, with clear definitions on which authorities can access data and sufficient safeguards to ensure respect for privacy.
"We call on the council to speed up its discussions and assume its responsibility on this crucial issue for European citizens," added the French deputy.
S&D Group president Hannes Swoboda also took the opportunity to criticise the council saying, "The European court of justice has done more for citizens' privacy today than the European council - which has consistently blocked efficient data-protection legislation at European level - has done in years.
"Surveillance must always be the exception, not the rule" - Hannes Swoboda
"It is high time for the council to bring forward good legislation on data protection, as adopted by the European parliament last month.
"Surveillance must always be the exception, not the rule. Mass collection of data, be it from governments, service providers or companies, cannot be accepted and police access to citizens' data must be targeted and authorised by a judge".
While GUE/NGL deputy Cornelia Ernst praised the work of campaigners, saying, "Today's judgement shows what activists can achieve
"This directive, with its resulting mass surveillance, contravened EU law and constituted a clear breach of the right to privacy under the convention on human rights and the charter of fundamental rights.
"After eight years of data retention and the consequent abuse of rights, today the rule of law and respect for the protection of personal data have been strengthened.
"Now, a similar review of many other personal data collection and transfer instruments, which have been adopted as part of so-called anti-terrorism measures, is required in order to win back the respect for privacy in a democratic society," concluded the German MEP.
However, Timothy Kirkhope, the ECR Group's home affairs spokesman, was a little less enthusiastic, describing the ruling as "frustrating".
"We need a directive that balances both privacy concerns with the need to tackle a constant threat" - Timothy Kirkhope
But, the British Tory deputy added, "There are understandable privacy concerns about indiscriminate collection and retention of people's data.
"Criminals and terrorists are growing increasingly sophisticated, so law enforcement must have the tools necessary to keep up with them.
"That's why we need a directive that balances both privacy concerns with the need to tackle a constant threat," explained the British deputy.
"The new European commission must bring forward a proposal urgently that allows access to the data of criminal suspects, without their knowledge, but without a blanket approach that would enable anybody’s data to be accessed without due reason.
"We cannot afford for this issue to go unresolved for long. EU countries have national standards to fall back on but in order to ensure other data sharing agreements can progress we need a swift resolution to this question mark."
Finally, he urged, "The upcoming election period and temporary inactivity of the commission and parliament associated with it should not be used as an excuse for the commission to drag their feet over urgent new proposals."