Caven Vines claimed during an interview in January 2015 the MPs knew about the abuse but did not intervene.
MPs Sir Kevin Barron and John Healey were awarded £40,000 each in libel damages at the High Court in London.
Mr Justice Warby said the "offensive and wrong" allegation had caused "real anger and distress".
Lawyers for the MPs said the allegation was "extremely grave" and could not have been more serious for politicians serving constituencies in the town, ahead of the General Election.
Sir Kevin, MP for Rother Valley, said he felt an anxiety and unease that he had not felt in other campaigns, which made it "very stressful". His integrity "had been called into question which was a very grave matter", the hearing was told.
Mr Healey, who represents Wentworth and Dearne, said the allegation had been damaging to his relationship with his constituents and had taken the focus away from things that needed to be done.
He considered they had left "a very dark stain on him and his integrity" which might never fully be removed, the judge was told.
Mr Vines, the former UKIP group leader in the town, claimed the pair had not suffered in any way, highlighting that both were returned to Parliament with an increased majority.
Judge Warby recorded the judgment after concluding Mr Vines had failed to put forward any defence which could possibly succeed.
An ex-UKIP councillor has been ordered to pay £80,000 in damages to two Labour MPs over remarks he made about the Rotherham's child abuse scandal.