The court ruling opens the way for investigating judges to decide whether to take the case against Sarkozy to trial.
"This is potentially the most devastating case for him," a high-ranking member of Sarkozy's Republicans party said on condition of anonymity after the ruling, in a reference to the many legal woes dogging the ex-president.
Sarkozy, 61, whose presidency was from 2007 to 2012, became the first former head of state to be taken into custody for questioning when he was charged with corruption, influence peddling and violation of legal secrecy in July 2014.
"An insane procedure is going to follow now," Sarkozy's lawyer Patrice Spinosi predicted after the ruling.
According to Spinosi the decision showed it was "possible to listen to a person even though he is having a conversation with his lawyer, with the sole motive that the phone line was opened under an assumed name."
Sarkozy's legal team has argued the recordings were a breach of lawyer-client privacy rules.
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