Lula was jailed in April after being sentenced to more than 12 years, and faces six other trials for alleged corruption.
Since then he has maintained his innocence.
Justice Marco Aurelio Mello issued the decision, which suspends the enforcement of a law that allows for corruption convicts to be jailed after their sentence is upheld on first appeal, as was the case with Lula.
If the decision stands, Lula could go free until he exhausts all appeals, a process which could take several years.k
Lula is a founder of the leftist Workers Party as president from 2003 to 2010 he rode a commodities boom and used social policies that helped lift millions from poverty.
He easily led early polls for this past October’s presidential election and registered to run.
However he was blocked from doing so by a law that strips those convicted of crimes upheld on appeal from running for office, a decision that would not be impacted by his possible freedom.
Mello’s decision will next be considered by the full panel of the Supreme Court, which is divided on the issue of whether to allow those convicted to remain free until their case fully winds through Brazil’s complex and backlogged legal system.