The appeals court said the district court in California had "abused its discretion" by banning the smartphone for infringing Apple patents. The case has now been sent back to the Californian court for reconsideration.
Apple is waging war on several fronts against Google, which makes the Android software that powers many of Samsung's devices.
The iPhone manufacturer scored a sweeping legal victory over Samsung in August when a US jury found that the Korean firm had copied critical features of the hugely popular iPhone and iPad. The court awarded Apple $1.05 billion (£625 million) in damages.
But in the case on Thursday, the appeals court ruled that Apple had failed to prove that consumers purchased the Samsung product because of the infringing technology.
"It may very well be that the accused product would sell almost as well without incorporating the patented feature," the court said.
The ruling comes after Google's Executive Chairman Eric Schmidt called the intensifying struggle between Apple and his company a "defining fight" for the future of the mobile industry.
Apple and Samsung are among the market leaders in the smartphone industry, which is one of the fastest developing sectors for phone manufacturers.
The ruling from the Court of Appeals is not expected to have a huge impact on the smartphone market, as the Nexus is an ageing product in Samsung's line-up.
