In a segment of the Kyle and Jackie O program broadcast in August 2022, the controversial Sydney media personality "stereotyped gay men as irresponsible in regard to their sexual health", the Australian Communications and Media Authority ruled.
It said Sandilands painted them as prime carriers of a virus that presented a danger to the community and, as a result, not deserving of sympathy or compassion.
The 2022 outbreak of the virus formerly known as monkeypox, which caused more than 140 confirmed cases, was declared a communicable disease incident of national significance by the chief medical officer.
In a statement released on Thursday alongside the findings of an investigation into the incident, ACMA chair Nerida O'Loughlin said the comments were derisive and insulting and breached standards of decency expected by the public.
"Although there was a basis at the time for a public discussion about mpox that involved reference to gay sexuality, the segment went beyond any acceptable standards," she said.
"Broadcasters have a responsibility to maintain appropriate levels of decency, and in this case the comments by Mr Sandilands were overly disparaging and insulting."
In the segment, Sandilands described the virus as "the big gay disease" and told the station's newsreader, who is gay, he would not allow him around his son for fear of him transmitting mpox.
In a submission to the investigation, broadcaster KIIS FM argued the segment was intended to bring about awareness to the community of the public health risk of mpox, but conceded it contained "some unfavourable descriptions of those susceptible to the virus, being homosexual males".
A separate ACMA investigation found Sandilands also breached decency rules in a September 2021 segment in which he disparaged the Paralympic Games.
The broadcaster agreed to deliver sensitivity training to staff following that investigation, and must report its progress back to the ACMA every six months for two years.
It will incorporate the findings from the most recent investigation into the training.
Prime Minister Anthony Albanese drew criticism for attending Sandilands' wedding to Tegan Kynaston in April. Guests included underworld figures John Ibrahim and Simon Main.
KIIS has been approached for comment.
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