Khartoum Bahri Appeal Court has overturned the conviction of Ferdoos Eltoum, who was one of a group of 12 Christian women arrested in the country as she left the El Izba Baptist Church in Khartoum.
The women, from Nuba Mountains, were arrested in June.
Ferdoos Eltoum was convicted in July of public indecency under Article 152 of Sudan's Criminal Code based on what she wore at the court hearing, not when she left the church.
This decision was overturned last month and formally agreed this week.
The appeal court ruled that the judge had acted out of turn by charging and convicting Ferdoos Eltoum for what she was wearing that day and not on the offence brought before the court.
During the trial in July two witnesses gave evidence on her behalf; a church minister testified that her clothing did not violate Christian dress codes, and a Sudanese woman stated that Ms Eltoum's dress did not violate Sudanese culture.
But the judge instead charged and convicted Ms Eltoum based on what she had worn to court and handed down a fine of 500 Sudanese Pounds (approximately £54).
She later appeared in court again on the original charge and was found guilty of indecent dress under article 152 and given a fine of 500 Sudanese Pounds (£54) and a suspended sentence of 20 lashes.
Her lawyers have also appealed this sentence and are awaiting the judgement.
The anti-persecution charity Christian Solidarity Worldwide (CSW) says the charge of public indecency is used disproportionally against religious and ethnic minorities in Sudan, which is a predominantly Muslim country.
It claims the law is vague, thereby allowing police and judges to make subjective judgments that in practice are discriminatory.
Mervyn Thomas, CSW Chief Executive, said, "Whilst we welcome the decision to overturn Ms Eltoum's conviction and the recognition that the trial judge made an error in law, we continue to call on the Sudanese authorities to review the Criminal Code and amend Article 152.
"We particularly remind Sudan of its obligations under Article 2 of the African Charter on Human and Peoples' rights of non-discrimination on the basis of religion or gender."