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The order allows for all pretrial hearings to continue, including one scheduled for June 5 at Fort Lewis, Wash., where Watada is stationed.
"Assembly of the court-martial and all proceedings ordinarily following assembly of the court-martial are hereby stayed," the court said in its written order. The court gave no indication when it would review lawyers' arguments.
Watada is charged with missing movement and conduct unbecoming an officer. If convicted, he could be sentenced to six years in prison and be dishonorably discharged.
The appeals court issued its decision after defense attorneys Kenneth Kagan and James Lobsenz of Seattle moved to dismiss all charges against Watada based on a double-jeopardy argument.
The Army has 10 days to respond to the defense's motion to dismiss the case.