The Supreme Court of Appeals said in its judgment that a High Court judge made several errors in a September 12., 2008 ruling.
"The appeal is upheld with costs," judge of appeal Louis Harms said.
Reopening of the case could damage Zuma’s image and it would almost certainly overlap with his campaign for the presidency in a general election expected around March or April.
It would be unlikely to stop him being elected but could add to political uncertainty in Africa’s biggest economy.
A High Court judge dismissed bribery, fraud and other charges against African National Congress president Zuma in September and suggested there was high-level political involvement in his prosecution.
The prosecution of Zuma, frontrunner to become state president, has divided the ANC and led to the removal of former President Thabo Mbeki, who was accused of interfering in the case, an allegation he denied.
Prosecutors appealed against the dismissal of the charges against Zuma. Whatever the ruling on Monday, either side could still appeal against it to a higher court.
South African President Kgalema Motlanthe said in a newspaper interview last week that the ANC would stick by Zuma and that the ANC leader remained the party’s candidate for the presidency.