REUTERS - A U.S. appellate court on Thursday vacated the conviction of a Palestinian activist charged with immigration fraud for failing to tell U.S. authorities she had been imprisoned in Israel for a 1969 supermarket bombing that killed two people.

Rasmieh Yousef Odeh, 68, has said her confession to the bombing was the result of severe torture by the Israeli military, including rape and electric shocks.

The 6th Circuit U.S. Appellate Court opinion said a lower court should have allowed expert testimony that Odeh was suffering from post-traumatic stress disorder (PTSD) due to torture in prison, and did not know her statements to immigration officials were false.

The appellate court said the lower court erred by excluding the testimony.

The expert would have testified that Odeh's PTSD caused her to interpret questions in a way to avoid any thought of her trauma, the court opinion said.

The three-judge panel also vacated the 18-month prison sentence against Odeh imposed last March, and sent the case back to the district court. Odeh has been out on bond during her appeal, said defense attorney Michael Deutsch.

"It goes to the heart of the case," said Deutsch of the opinion. "We're happy, because we're still going to be fighting for her rights in court."

Another judge on the panel wrote that the conviction should be vacated on other grounds.

If the lower court decides the PTSD testimony is admissible, it will require a new trial. If the court finds another reason to exclude the testimony, the case will go back on appeal, Deutsch said.

Gina Balaya, a spokeswoman for the U.S. Attorney's office in Detroit, said the office respects the court's opinion and will argue its position at the evidentiary hearing.