The original verdicts in the case had provoked outrage in Croatia where Ivo Sanader, the country's prime minister, had protested to the UN, arguing that the sentences were too light.
Sljivancanin, who had already served most of his initial sentence, stood stone-faced as the judges added a charge of aiding and abetting murder to his conviction, and sent him back to jail.
Persa, his wife, was escorted out of the court by a dozen policemen with her children in tears.
Her husband had been provisionally released in December 2007 to await the appeal outcome in Serbia.
Sljivancanin, 56, served as a major in the former Yugoslav People's Army (JNA) during the war in the Balkans in the 1990s.
He had previously stood trial before the International Criminal Tribunal for the former Yugoslavia (ICTY) with Mile Mrksic, a 62-year-old former JNA colonel, for torturing and executing nearly 200 Croat prisoners of war.
The court also upheld a sentence against Mrksic, his superior, on Tuesday.
The men were convicted in September 2007, with Mrksic jailed for 20 years for murder, torture and cruel treatment.
Miroslav Radic, a third defendant, was acquitted.
Mrksic and Sljivancanin had sought an acquittal on appeal in Tueaday's hearing, while the prosecution had asked for heavier sentences for both men.
The prosecution alleged that the JNA laid siege to the city of Vukovar from August to November 1991, when it fell to Serb forces.
|Sljivancan embraces his lawyer before the verdict as Mrksic looks on [AFP]
Several hundred people sought refuge at the Vukovar hospital in the last days of the siege in the hopes that it would be evacuated in the presence of international observers.
But the indictment said that about 400 non-Serbs were removed by the JNA from the hospital, loaded onto buses and taken to JNA barracks and later to a farm in nearby Ovcara where they were beaten.
A court document said: "Soldiers then transported their non-Serb captives in groups of about 10 to 20 to a ravine ... where they killed at least 264 Croats and other non-Serbs.
"After the killings, the bodies of the victims were buried by bulldozer in a mass grave at the same location."
The judges found that Sljivancanin was ordered by Mrksic to evacuate the hospital, and had thus been entrusted with a legal duty to protect the prisoners.
They said his "failure to act persuant to his duty under the laws and customs of war substantially contributed to the murder of the prisoners of war".
Judge Meron said: "The only reasonable inference is that Mr Sljivancanin was aware that the TOs [Serb territorial defence units] and paramilitaries would likely kill the prisoners of war and that if he failed to act, his omission would assist in the murder of the prisoners."