The Court of Appeals for the Armed Forces threw out the conviction of Sgt. Lawrence Hutchins III of Plymouth, Mass., who has served about half of his 11-year sentence.
According to the ruling posted on the court's website, the judges agreed with Hutchins, who claimed that his constitutional rights were violated when he was held in solitary confinement without access to a lawyer for seven days during his interrogation in Iraq.
Hutchins led an eight-man squad accused of kidnapping a retired Iraqi policeman from his home in April 2006, marching him to a ditch and shooting him to death in the village of Hamdania.
None of the other seven members of the squad served more than 18 months.
The move is the latest in a series of twists and turns for Hutchins, whose case already was overturned once by a court that ruled his 2007 trial was unfair because his lead defense lawyer quit shortly before it began.
The same court that accepted Hutchins' new petition overruled that decision, saying the problem was not grave enough to throw out the conviction. Hutchins was returned to the brig after eight months working at a desk job at California's Camp Pendleton.
He was set to be released in July 2015 at the earliest.
Hutchins' lawyer, Babu Kaza, said he expects him to now be released in days.
"Sgt. Hutchins and his family have suffered enough with this case, and it's time for this to be over," Kaza said. "Enough is enough."
The Navy can appeal to the Supreme Court or send the case to the convening authority, who can either order a retrial or let the ruling stand.
Navy officials could not be immediately reached for comment.