The death of Halbach and the conviction of Avery and Dassey placed Manitowoc County in the national spotlight.
US Magistrate Judge William Duffin overturned Dassey's conviction in August, citing his age, intellectual deficit and lack of guardian during questioning.
"The writ of habeas corpus is GRANTED unless the State of Wisconsin elects to retry Dassey within 90 days of issuance of this court's mandate, or of the Supreme Court's final mandate", the judges wrote.
The three-judge panel from the court of appeals ruled on Thursday that the lower court's decision was correct, almost a year after the original decision.
Thursday's ruling doesn't necessarily mean Dassey will be freed from prison. "This round goes to Brendan Dassey 2-1".
In a joint statement, Dassey's lawyers said they were "overjoyed".
Dassey has already served about 10 years of a life sentence. Avery's trial attorneys argued their client was framed for Halbach's murder as revenge for a $36 million settlement granted to Avery for wrongful conviction in a rape case.
The Wisconsin Department of Justice has up to three months to decide whether to re-try Dassey for Halbach's murder.
The state of Wisconsin can now ask for a review of the decision by the 7th Circuit Court or appeal to the U.S. Supreme Court.
"Dassey, however, had trouble maintaining a consistent story except when he was being led step-by-step through the facts, thus confirming that his confession emerged not from his own free will, but from the will of investigators".
"There was no physical evidence linking Dassey to the murder of Halbach - investigators did not find any of Dassey's DNA or blood on any of the many objects that were mentioned in his confession - the knives in Avery's house, gun, handcuffs, bed, RAV4, key, or automotive dolly", the decision states.
WBAY spoke with Bob Dvorak, an attorney who's been part of Dassey's post-conviction team.
Attorney Laura Nirider said they want to send Dassey home to his mother as soon as possible. Dassey has offered a detailed release plan that was prepared with the assistance of a clinical social worker with experience in similar cases. A United States #Federal Appeals Court upheld the decision made by a lower court Thursday, stating that Dassey's confession was not legitimate.
Dean Strang, who defended Avery with Buting, said the lawyers were "relieved and gratified" by Thursday's ruling.
During one of the interviews, for example, Wisconsin Department of Justice Special Agent Tom Fassbender said: "Mark and I, yeah, we're cops, we're investigators and stuff like that, but I'm not right now".
He was sentenced to life in prison.