By a 2-1 vote, the three-judge panel of the 9th U.S. Circuit Court of Appeals said California was wrong to require applicants to show good cause to receive a permit to carry a concealed weapon.
"The right to bear arms includes the right to carry an operable firearm outside the home for the lawful purpose of self-defense," Judge Diarmuid O'Scannlain wrote for the majority.
Judge Sidney Thomas dissented, writing that the good cause requirement limited the number of people carrying concealed handguns in public to those legitimately in need.
"It limits the risk to public safety by reducing the number of guns in public circulation, but allows those who will most likely need to defend themselves in public to carry a handgun," Thomas wrote.
Awarding concealed weapon permits is the responsibility of each of California's 58 counties. Officials are required to follow the state rules requiring applicants to show good cause and moral character.
The San Francisco-based appeals court said those requirements were too strict and ran afoul of a 5-4 landmark U.S. Supreme Court ruling in 2008 that struck down a Washington, D.C., handgun ban and said law-abiding citizens are allowed to have handguns in their home for self-defense.
The appeals court on Thursday reinstated a lawsuit filed in 2009 by Edward Peruta, who challenged San Diego County's denial of a concealed weapons permit.
The ruling on Thursday also disagreed with three other federal appeals courts that have upheld permit rules similar to the one in California.
The U.S. Supreme Court often takes cases when federal appeals courts issue conflicting rulings.