Shane Rowan (51) had operated a car dealership and valeting business in Greystones from 2004.
Wicklow Circuit Court found neighbour Barry Paterson, of Blacklion Cottages, guilty of slander and ordered him to pay Rowan €10,000 damages plus costs.
Paterson had been involved in a parking row with Rowan previously, and had complained the car business did not have planning permission before he made the drugs insinuation.
"He destroyed my life, and he tried to destroy my character," Mr Rowan said of Paterson.
Mr Rowan, who runs a clothes shop in Bray, said he earned all his money honestly and was a believer in hard, honest work. "For someone to say such a horrific thing about me was the most devastating thing that could have happened," he explained.
"My partner and children had to carry that as well. It just destroyed me," Mr Rowan added. "Being able to explain to the judge what the effects on me were was just a great release. I broke down when I was telling how it affected me," he stressed.
"The case was never about money or compensation. I just wanted to clear my name," he said after the recent case.
Mr Rowan said he had known many families affected by drugs and had attended many funerals in his life that stemmed from drug use by young people.
"All I want to do now is rebuild my life. My car business has closed down, but all the people that know me have been very supportive," he told the Herald.
"Now I just want everyone else to know that what this man said about me was wrong," he added. Judge Gerard Griffin said he was satisfied the drugs allegation Paterson had made was reckless and malicious, with the aim of getting Mr Rowan's landlord to evict him from his premises at Blacklion in Greystones.
The court heard that Paterson called the landlord, Jimmy Kinsella, at 7.30am on September 1, 2005.
During the conversation, he alleged Mr Rowan was dealing drugs and that the gardai had raided the premises.
He had also asked Kinsella how a man of Mr Rowan's "demeanour" could afford BMWs.
Paterson disputed the wording of his conversation with the landlord, saying he only said he had "heard rumours" and asked if Rowan "was involved in drugs".
Paterson also alleged that in one confrontation, Mr Rowan had jostled him and emerged from his office brandishing a samurai sword.
Mr Rowan denied this, insisting the sword was a wooden theatrical prop and that he had pointed to a spot on the ground with it and told Paterson not to come beyond it.