An Iranian opposition group has won a round in its long legal fight to get the State Department to stop classifying it as a terrorist organization.

A federal appeals court on Friday ordered the State Department to reconsider its decision to keep the People's Mujahedeen Organization of Iran on its list of foreign terrorist organizations. The designation prohibits groups from raising money and obtaining other support in the United States.

The court said the U.S. government must give the Iraq-based group a chance to respond to claims that it continues to engage in terrorist activity or at least retains the capability and intent to do so. The government also maintains a file of secret information that it says supports the continuing terrorist designation. Friday's ruling did not address the classified material.

The People's Mujahedeen has argued that it stopped military operations against the Iranian regime and renounced violence in 2001, and handed over its weapons to U.S.-led forces after the ouster of Saddam Hussein in Iraq in 2003.

The European Union dropped the People's Mujahedeen from its list of banned terrorist groups last year.