Lula, as he is known throughout Brazil, governed Latin America's largest economy between 2003 and 2011. He was convicted over graft allegations in 2018 and released in late 2019.
In a surprise decision, Justice Edson Fachin said that a court in the southern city of Curitiba did not have the authority to try Lula on corruption charges and that he must be retried in federal courts in the capital Brasilia.
The decision means Lula would be eligible to run for president next year should he wish to challenge the incumbent, Jair Bolsonaro, according to local newspaper Folha de Sao Paulo.
Lula's graft conviction in 2018 blocked him from running in the elections that year. He was then released from prison in late 2019, but could not run for office due to his criminal record.
The charismatic former union leader is a polarizing figure but still popular with many of the country's poor, who credit him for bringing millions out of poverty.
(FRANCE 24 with REUTERS)