In a restitution case that was closely watched in the art world, a New York appellate court has upheld a ruling that returned two prized Egon Schiele drawings to the heirs of Fritz Grünbaum, a Viennese cabaret singer whose large art collection was confiscated before he was murdered in a Nazi concentration camp in 1941.

The unanimous ruling by the five-judge panel, issued Tuesday, means that Timothy Reif and David Frankel, Mr. Grünbaum’s heirs, can keep possession of the two Schiele artworks, “Woman in a Black Pinafore” (1911) and “Woman Hiding her Face” (1912), that were part of Mr. Grünbaum’s 449-piece art collection.

The two works had been bought by a London art dealer, Richard Nagy, six years ago. But they were returned to the heirs last year after a ruling by a New York state court judge, Charles J. Ramos. Among the legal justifications he cited were the new provisions of the Holocaust Expropriated Recovery Act, a federal law enacted in 2016 that eased statute-of-limitations restrictions for the recovery of artworks stolen during World War II.

In upholding the ruling, Appellate Division judges for Manhattan and the Bronx wrote that their decision was also “informed by the intent and provisions” of the HEAR act, though they relied principally on the finding that the heirs had a better claim to the works because the evidence indicated Mr. Grünbaum had clearly owned them before the war and had never voluntarily transferred title.