Piinochet, 90, can now be put on trial for responsibility in two murders by the "Caravan of Death", a band of soldiers who carried out clandestine killings in the months after the coup in 1973 that brought Pinochet to power.
In 2002 the Supreme Court dropped an earlier attempt to try Pinochet, a former army general, on the "Caravan of Death" case, arguing that mild dementia hindered his ability to defend himself.
But on Wednesday, the appeals court voted 17 to six to approve a request to remove Pinochet's immunity in the case and allow him to be tried for the killings of two political prisoners, Wagner Salinas and Francisco Lara, detained in Curico on 11 September 1973, the day of the coup.
Both were taken to Santiago and were shot dead on 5 October, according to Hugo Gutierrez, an attorney for the men's families.
The immunity that Pinochet enjoyed by virtue of his position as a former president had already been lifted on four previous occasions, including an investigation of the 1975 "Operation Colombo" in which 119 opponents of the regime disappeared and are thought to have been killed.
The appeals court in Santiago also upheld a lower court ruling that Pinochet could be released on bail from house arrest pending trial.
Pinochet's lawyer at first said that his client could not post the $19,230 bond since most of his funds have been frozen in an investigation of secret bank accounts in which he allegedly accumulated $27 million.Pinochet has been under house arrest since November 23.
But by the afternoon Pinochet came up with the cash, posted bail and drove out to his estate on the central Chilean coast.
At least 3,000 opponents of the military government are thought to have been killed during the 1973-1990 dictatorship, and many more were jailed and tortured.