The decision overturns a previous ruling by the secret Foreign Intelligence Surveillance Court (FISC) made last May, which was rejected the US government's efforts to expand its domestic snooping authority.
The move marks a decisive victory for law enforcement officials, but has sparked concern among civil libertarian groups that fear the new powers will infringe on citizens' rights.
The appeals court ruling will, essentially, tear down barriers for federal law enforcement officials conducting surveillance operations, allowing them to listen in on phone calls, read e-mail and conduct secret searches.
Attorney general John Ashcroft hailed the decision saying that it was a "victory for liberty, safety and the security of the American people".
Meanwhile, Ann Beeson, litigation director of the Technology and Liberty Program of the American Civil Liberties Union (ACLU) said that the ACLU was "deeply disappointed with the decision" and that it suggested that the secret appeals court "exists only to rubberstamp government applications for intrusive surveillance warrants".
Ashcroft said that he is directing a series of actions in light of the decision, including implementing a computer system that will allow agents to submit surveillance applications from the field to the US Federal Bureau of Investigation headquarters and to the Department of Justice for approval.