Jean-Michel di Falco, 84, was accused of sexual abuse while he was a priest and headmaster of the Saint-Thomas d'Aquin school in Paris between 1972 and 1975.
Prosecutors had dropped a criminal investigation into the allegations of sexual abuse against the now retired bishop because the statute of limitations had passed.
But a Paris appeals court ordered di Falco -- who refutes any wrongdoing -- to pay damages to Pierre-Jean Pages, 65, following a long legal battle after he brought a civil case against the clergyman in 2001.
The court ruled that the civil action was not subject to the same statute of limitations.
It "follows from the evidence presented that Mr. di Falco's wrongful conduct of a sexual nature caused Mr. Pages bodily harm, for which he is liable to pay compensation," the court said in its judgment.
Di Falco maintains his "perfect innocence" and would appeal the ruling to France's top court, his lawyer told AFP after the decision.
He was "extremely shocked" that the court could suggest that "the moral and psychological support provided by Jean-Michel di Falco to an orphaned boy... could be abnormal or inappropriate", Olivier Baratelli told AFP.
Once one of France's most prominent priests, the former Paris auxiliary bishop was ordered to pay Pages damages, including €10,000 (more than $11, 000) for sexual harm, €70,000 for professional impact and nearly €81,400 for temporary functional impairment.
Di Falco was ordained in 1968 and named a bishop at Paris's Notre Dame Cathedral in 1997.
In 2000, he served as a communications consultant to the body advising then-pope John Paul II.
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