In 2005, Dassey, then 16, confessed to authorities that he assisted his uncle, Steven Avery, in raping and killing Halbach.
The court ruled his confession was voluntary.
A federal judge had overturned Dassey's conviction a year ago, accepting that detectives took advantage of Dassey's learning disabilities to get a confession. The judge called for Dassey to be released; however, the state of Wisconsin was granted a full review by the U.S. Seventh Circuit of Appeals-resulting in Friday's decision.
The three dissenting judges wrote that the decision was "a profound miscarriage of justice".
Dassey has remained in prison while the state appeals.
'Making A Murderer's Brendan Dassey To Remain In Prison After Court Ruling
Further, the judges argue that Dassey provided "many of the most damning details himself in response to open‐ended questions" and that on a number of occasions "he resisted the interrogators' strong suggestions on particular details", the majority opinion reads.
In her dissent, Chief Judge Diane P Wood added: 'Without this involuntary and highly unreliable confession, the case against Dassey was nearly nonexistent'. "Dassey will spend the rest of his life in prison because of the injustice this court has chose to leave unredressed".
However, the appeals court judges were not unanimous in the decision, with Judge Ilana Diamond Rovner saying of Dassey in her dissent, "His confession was not voluntary and his conviction should not stand, and yet an impaired teenager has been sentenced to life in prison". However, Judge Duffin overturned the conviction after ruling that investigators in the murder case made promises that "he would not be punished if he admitted participating in the offenses" and that "he had nothing to worry about".
Dassey, the nephew of convicted killer Steven Avery who was featured in the docuseries Making a Murderer, will now be required to serve the rest of his life in prison. A three-judge panel from the 7th Circuit upheld the magistrate's ruling in June.
Brendan Dassey is pictured in this undated booking photo.