Napster was granted a reprieve on Friday just hours before the music-swapping site was due to be effectively shut down.
As millions of Napster users inundated the site trying to download music before the midnight, Pacific Time deadline, a panel of two judges in San Francisco allowed the company's appeal against the effective shutdown.
Napster will now be able to stay in operation until the piracy trial resumes, later this year.
US District Court Judge Marilyn Hall Patel on Wednesday issued a preliminary injunction against Napster and in favour of the Recording Industry Association of America, which sued Napster earlier this year, alleging music piracy.
Judge Patel's injunction would have prevented the Napster site from using MP3 files; helping people use the files; and copying the files to which the plaintiffs hold rights.
If her injunction had stood Napster executives said they would have had to close down.
However the appeal for an emergency stay of the injunction by Napster lawyers to the 9th US Circuit Court of Appeals was successful. The two appeals court judges, granting Napster the stay, said "substantial questions" had been raised about "the merits and form of the injunction".
On its website, Napster again thanked users for their support and said that the site would remain open until its appeal was heard, "probably in September".
Napster founder Shawn Fanning said: "I am happy and grateful that we do not have to turn away our 20 million users and that we can continue to help artists. We'll keep working and hoping for the best."
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