Michael Morton was given a life sentence in 1987 for the murder of his wife Christine in Williamson County, the Austin American-Statesman reported.
The Texas Court of Criminal Appeals agreed Wednesday to toss out Morton's conviction and sentence.
"We determine that (Morton) is entitled to relief on his actual innocence claim," the court said, noting DNA tests show another man, not identified in court documents, was the killer.
Morton was released from prison Oct. 4 in an agreement between defense lawyers and Williamson County District Attorney John Bradley pending the court's decision.
Bradley said he would "immediately" present a motion to dismiss the indictment.
Morton will be eligible for compensation from Texas of $80,000 for each year he was wrongly imprisoned, totaling about $2 million, the American-Statesman reported.