Mohammad Kamaruzzaman, 61, the assistant secretary general of the opposition Jamaat-e-Islami party, was the fourth person to be convicted by the much-criticised International Crimes Tribunal and the third senior politician.
The tribunal headed by Justice Obaidul Hassan found Kamaruzzaman guilty of genocide, torture, abduction and crimes against humanity including a mass killing at a site which has since become known as the "Village of Widows", according to an AFP correspondent at the court hearing.
"He has been sentenced to death by hanging for crimes such as genocide and murder. We feel relieved," Attorney General Mahbubey Alam told AFP.
Prosecutors said Kamaruzzaman was a "chief organiser" of the notorious Al Badr militia accused of killing thousands of people in the nine-month war.
The genocide charge against Kamaruzzaman stems from the slaughter of at least 120 unarmed Bangladeshi farmers in the remote northern village of Sohagpur.
Three of the widows testified against Kamaruzzaman during his trial.
Mohammad Jalal Uddin, a farmer of Sohagpur who lost seven members of his extended family in the killing, was delighted at the verdict.
"I lost my father, aunt and other relatives. Their crimes were that they took part in training to join the freedom fight. They were also accused of concealing freedom fighters," he said.
"My mother and aunt died without getting justice. But at least I've seen justice," Jalaluddin, who heads the village's welfare society for widows, told AFP by phone. "We still have 37 widows in the village."
Defence lawyers rejected the charges as baseless, saying the chances to prove their client innocent were severely curtailed as the court only allowed five witnesses to testify for Kamaruzzaman.
Previous verdicts from the ICT have sparked widespread violence on the streets of a country which has a 90 percent Muslim population.
The latest verdict came only days after the deaths of at least 38 people in clashes between the security forces and supporters who are demanding a new blasphemy law.
The secular government led by Prime Minister Sheikh Hasina has insisted that it will not bow to the demands of the hardliners.
Around 150 people have now been killed since the first verdict against an Islamic TV preacher was sentenced to death on January 21.
The main opposition Bangladesh Nationalist Party (BNP) and its allies have criticised the war crimes court as a political tool for the ruling Awami League government to target its opponents.
Two BNP officials and eight other Jamaat officials including its chief and deputy are still being tried for war crimes. A verdict against Ghulam Azam, the wartime head of Jamaat, is expected later this month.
Unlike other war crime courts across the world, the Bangladesh tribunal is not endorsed by the United Nations and the New York-based Human Rights Watch group has said its procedures fall short of international judicial standards.
The government says the trials are needed to heal the wounds of the 1971 war in which it says three million people were killed and 200,000 women raped. Independent estimates put the death toll between 300,000 and 500,000.
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Time is ripe to declare these brute Islamists as terrorist organisations and ban them officially. Although it may not last but it will stgmatise them internationally. That will help the global community to ostracize them.
What a shameful political act under the guise of justice. You'll never hear any Indian trained Mukti-Bahini terrorist even tried, let alone punished, for killing, rape, and arson of hundreds of thousands of Bengali and non-Bengali population loyal to their state (Pakistan). Who knows, this Awami League government also establishes "The International Court of Justice at Dhaka" or "United Nations" as a next step after setting up "International War Crimes Tribunal".
i m very happy with BD court's such decision. our CP should also conduct trials against pakistanis who were involved in 1971 massacre.
Kudos to the common people of BD.