It wasn't immediately clear if the order would hold, as the government of President Sebastian Pinera has made clear its firm support for the hydroelectric project, despite opponents' argument that construction will devastate an environmentally rich region of Patagonia, southern Chile.
Environmental campaigners and other lobby groups warn the damage to Patagonia will affect Chile's lucrative tourism industry in the south, ruin the region's economy and hence will be counterproductive.
Chile's plans for a hydroelectric complex matching neighboring Brazil's super dam projects are seen by the government as advance preparation for a growing economy and its rising energy needs.
The appeals court in Puerto Montt in Llanquihue province ordered a stay following the protesters' petitions.
"The project is paralyzed until the essence of the matter is resolved," a statement from the court said, but it wasn't immediately clear if the government or the project team intended to comply.
The HidroAysen project carries a $2.9 billion price tag, likely to rise, and is being run by influential Chilean-Spanish consortium Endesa-Colburn. But since the government announced approval in May the project has been bedeviled by controversy, public protests and violent demonstrations.
Opponents say the planned five dams on two river valleys in Patagonia will devastate a beautiful region, much of it in pristine wilderness that includes unique fauna and flora.
The Pascua and Baker rivers, which will be dammed as a result, are the largest in Chile with crystal waters fed by glaciers.
To add insult to injury, say the protesters, the hydroelectric generators will be linked with the national grid by more than 1,200 miles of transmission lines passing through areas of unspoiled scenic purity. The protesters are unconvinced by assurances that some of the power lines could be laid in such a way as to protect the views.
Further tensions have arisen over reports that the project will displace more than 25,000 indigenous people and swell the local population by more than 5,000 specialized workers, many of them from outside the region, and will be a drain on the existing towns and villages.
An overwhelming majority of Chileans now reject the hydroelectric project, daily newspaper La Tercera reported after conducting an opinion survey in May.
La Tercera said opposition to the project reached 74 percent of those polled. That compared with the 61 percent rejection recorded in polls before the government announced its approval for the project.
Officials argue the complex of dams is vital to ensuring energy security for Chile's growing economy. Critics say the project is ill-conceived and will create a giant monopoly over Chile's power grid dominated by the power companies involved.
Critics say traditional hydroelectric projects no longer make economic sense, cause vast ecological damage and will soon be out of date as rapid advances are made in solar and wind power.