Egypt's Court of Cassation has ordered that Mr Greste and his two Al Jazeera colleagues be re-tried on allegations of spreading false news and supporting the banned Muslim Brotherhood.
Peter Greste, Mohammed Fahmy and Baher Mohammed will have to remain in prison ahead of another legal hearing, due within a month.
They've now spent more than a year in jail since they were first arrested in December, 2013.
The drawn-out legal nightmare for the three Al Jazeera employees isn't just taking a toll on them and their family and friends - it's proving to be hugely damaging for Egypt.
The country's president, Abdel Fattah al-Sisi, has already acknowledged the damage the case is doing, saying that had he been in power in late 2013 he would have preferred the three men were deported rather than put on trial.
Now a re-trial has been ordered, the men revert from being convicted to accused - and that offers the possibility that Peter Greste and Mohammed Fahmy could be deported.
This comes from a new law, passed by President al-Sisi, that allows foreign prisoners to be deported during the early stages of a criminal process, so it wouldn't apply to Baher Mohamed, who's Egyptian-born.
The law was widely seen as being tailor-made for this case so the lawyers for Peter Greste and Mohammed Fahmy are now pushing for their clients to be deported.
Peter Greste's father, Juris has told the ABC it's one possibility that's being explored.
"Our hope and our expectation is that that will get Peter home sooner. However, it is not just the single track process in that we understand that that is not going to cross the progression of the other legal stream and that is, his case being taken to a re-trial."
If the case does go to a re-trial, the three men could find themselves having to stay in Egypt for months or even years.
Marwa Omara is Mohammed Fahmy's fiancee, and she spoke outside the court in Cairo.
"He's not only fighting for his freedom, he's fighting for the freedom of the press and freedom of expression. It's a very tough battle but we will keep fighting for this. A re-trial means a very lengthy process, it can take up to a year."
SBS Europe correspondent Brett Mason has attended the Cairo court where the three men had appeared in cages - an image that's become synomymous with the trial.
He says there'll be another legal hearing in the next few weeks.
"Within a month there will be a hearing to determine when that trial will begin, that will be that procedural hearing where the three men will appear and that's when they can apply for bail. The re-trial process itself will be protracted and take quite some time so the real push now is if there is going to be a re-trial and and President Sisi won't deport at least Peter Greste and Mohammed Fahmy, that the defendants be released, at this stage they're not convicted of anything in that sense so they should be released into the community as opposed to spending 18 months in jail while their guilt or otherwise is determined."
Al Jazeera has released a statement on this latest development.
The broadcaster says the Egyptian authorities have a simple choice - they can free the men quickly, or continue to string the case out, continuing an injustice and harming the image of their own country in the eyes of the world.
It says Egypt should choose the former.
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