Court of Appeal judges in Edinburgh ordered the former Nat, 38, to face a retrial over claims she embezzled £25,000 from two pro-indy groups.
The judges ruled that McGarry suffered a miscarriage of justice when she pled guilty to the fraud rap.
The ex-Nat, 38, had her conviction for allegedly embezzling cash quashed — but will be brought back to court for a retrial.
McGarry wept after Lord Carloway, Scotland’s most senior judge, confirmed the decision at the Court of Criminal Appeal in Edinburgh.
The judge said: “The decision of the court is that there has been a miscarriage of justice. The conviction will therefore be quashed and a retrial be ordered.
“The court will give its full reasons in writing in the future.”
McGarry, of Clarkston, Glasgow, sat in the dock for two hours as her lawyer Gordon Jackson QC made his legal arguments to Lord Carloway, Lord Turnbull and Lord Drummond Young.
Full details of why the judges’ decision was made cannot be revealed for legal reasons.
McGarry was jailed for 18 months in June after admitting two fraud charges at Glasgow Sheriff Court.
It was alleged she stole £4,661 from the SNP Glasgow Regional Association and £21,000 from Women for Independence between 2013 and 2016.
Prosecutors claimed some of the money embezzled included donations made to a foodbank.