The commission had warned RadioLive that it had to act with extreme care because of the closeness of the election and because strict pre-election broadcasting rules had come into effect.
A complaint by the Labour Party to the Broadcasting Standards Authority was not upheld.
It found the show did not fit the definition of an election programme, and even if it had, would not have breached broadcasting standards.
Today's decision by the Electoral Commission, to be formally released at 5pm, will now see the police decide whether to prosecute the broadcaster which could be fined up to $100,000.
Labour's deputy leader Grant Robertson has said Labour had always felt the programme was a clear breach of the election broadcasting law and it was unfair.
"That's why we are pleased the commission agrees with us."
Asked if Labour still would have complained had its then-leader Phil Goff been offered the same opportunity, Mr Robertson said that offer was never forthcoming.
"Obviously if it had been we would have had to have thought about what the consequences were, taken some advice about that but that opportunity was never provided."
Mr Robertson said there needed to be consideration on how to deal with such complaints more quickly because of the advantage it gave to one politician over others.
"Quite clearly having this decision come out several months later means the action is over. What this gave the Prime Minister was an unfettered hour of radio in which he could put across himself, align himself with the people he called his 'friends' and be in a situation close to the election where he had that hour in an unfettered environment.
"That gave him a lot of power at that time."
Mediaworks Radio general manager Jana Rangooni said she was "surprised" at the Electoral Commission's ruling.
She said Radio Live had worked with the commission to make sure the programme would not be in breach of election rules.
"I'm surprised at the outcome in light of the fact the BSA ruled it wasn't in breach of election rules.
"It's fair to say we took all the advice and care we could to ensure this was not an election programme or an election ad."
Ms Rangooni said her staff had only received the commission's ruling last night and were still evaluating it in detail.
They were waiting to hear from police investigators before deciding whether to mount a legal defence, she said.
She was "disappointed" the ruling had been leaked.