The law, one of the strictest in the country, requires voters to show government-issued photo ID before they can cast their ballots.
The three-judge panel said the law is unconstitutional because it does not apply to two groups of voters, the Indianapolis Star reported. Absentee voters are not required to file affidavits swearing to their identity, and residents of long-term care facilities do not have to show ID if their facility is a polling place.
While the court said the problems with the law could be fixed while keeping the ID requirement, Gov. Mitch Daniels angrily called the decision "an act of judicial arrogance." He predicted it would be overturned by the state Supreme Court.
The law was upheld last year by the U.S. Supreme Court. The League of Women Voters filed a new challenge in state court based on the "Equal Privileges and Immunities Clause" in the state constitution.