The British Court of Appeal has ruled in favour of the terrorism suspect, supporting last December's High Court judgment that the UK government cannot refuse to register Hicks' citizenship, which he is entitled to because his mother was born and raised in England.
The UK Home Office has until April 25 to lodge a fresh appeal to the House of Lords, via the Court of Appeal, with a decision expected in early May.
If that is denied, the Home Office then has the option of directly petitioning the House of Lords for a hearing, which would be held late this year or early 2007 if granted.
Hicks, 30, from the Australian city of Adelaide, has been held by US authorities at Guantanamo Bay since he was captured with Taliban forces in Afghanistan in late 2001.
He has pleaded not guilty to charges of conspiracy to commit war crimes, attempted murder and aiding and abetting the enemy.
He has sought British citizenship because the UK government, unlike Australia, has successfully fought for the release of its nationals from Guantanamo Bay.
His father Terry says the Court of Appeals decision is pleasing, but there is still a long road ahead.
Terry Hicks said his son was most likely oblivious to the development and would not know of it for about three weeks, when his lawyers are able to visit to tell him.
’Fighting lost cause’
Hicks' US military lawyer, Major Michael Mori, believes the UK government has no reason to continue its legal campaign to prevent the Guantanamo Bay detainee being granted British citizenship.
Major Mori said the British Home Office was fighting a lost cause.
"We won at the lower court, the appeals court was unanimous in favour of David Hicks, if they want to waste their time going to the House of Lords that's their choice," Major Mori told the Nine Network.
"The court basically said David is entitled to his citizenship. Get on with giving it to him. There's no legitimate basis to take it away from him."
He said Mr Hicks would never renounce his Australian citizenship and he did not believe a dual citizenship would harm his client.
Australia’s Attorney General Philip Ruddock said Mr Hicks won't be prevented from returning to Australia if he is granted British citizenship and is released from detention.
Mr Ruddock said there would be no legal basis to prevent him from returning to Australia.
"If he is no longer held by the United States he has an entitlement to return to Australia," Mr Ruddock told ABC Radio.
"That's a matter of international law - we can't deny our own citizens access to Australia."
Mr Ruddock said even if Hicks did not possess a valid Australian passport it would be unlikely the Australian government would deny him from being granted a new one.
He also confirmed reports that Mr Hicks has been returned to solitary confinement at the military base two years after the Australian Embassy in Washington demanded he be removed from solitary confinement. But he denied reports that Mr Hicks was being mistreated.