By an 8-3 vote, the San Francisco-based 9th U.S. Circuit Court of Appeals said all condemned inmates sentenced by a judge should have their sentences commuted to life terms.
The case is an interpretation of a 2002 decision by the U.S. Supreme Court, in which the high court found that juries, not judges, must render death sentences. But the Supreme Court left unclear whether the new rules should apply retroactively to inmates condemned by judges in Arizona, Idaho and Montana, Colorado and Nebraska.
"By deciding that judges are not constitutionally permitted to decide whether defendants are eligible for the death penalty, the Supreme Court altered the fundamental bedrock principles applicable to capital murder trials," Judge Sidney R. Thomas wrote for the court.
The 9th Circuit does not have authority over Nebraska and Colorado. Appeals courts in those jurisdictions have not ruled on the issue, lawyers involved in the issue said.
Defense attorneys hailed the verdict.
"This is fundamental justice," said Ken Murray, a federal public defender in Phoenix.
Murray estimated that the decision affects at least 100 inmates on Arizona's death row alone.
The decision will challenged by the Arizona Attorney General's office, reports CBS News Correspondent Steve Futterman, which says the new rules should not be retroactive.
Lawyers involved in the case said the ruling was likely to be appealed to the U.S. Supreme Court.
The Supreme Court made it very clear last year that juries and not judges must decide death penalty cases, said CBSNews.com Legal Analyst Andrew Cohen.
"I'm not sure the Supreme Court is going to want to wade back into this particular battle," he said. "The Justices were fairly clear last year in deciding that juries and not judges ought to have the power to make life or death decisions in criminal cases, and for that rule to make a lot of sense it almost has to apply retroactively.
"If the Supreme Court takes this appeal, it will be a fairly clear signal that the Justices want to refine their ruling last year to make clear which death row inmates can be helped by it," he added. "If the High Court does not take this appeal, it will be a clear signal that the Court is perfectly happy with the way the federal appeals court has handled the matter."
The case the appeals court used to decide the issue concerned Arizona inmate Warren Summerlin, who was found guilty of first-degree murder in the 1981 slaying of Brenna Bailey, 36.
The Tempe finance company administrator's body was found in the trunk of her car a day after she visited Summerlin to check on money he owed. Summerlin was convicted in 1982 and a judge sentenced him to death.
"The 9th U.S. Circuit is not the first court to conclude that the law applies retroactively to current death row inmates and it likely won't be the last, either," said Cohen.