The court faulted Governor Greg Abbott for directing the legislature to draw it based on race.
The 2-1 ruling by a three-judge panel dealt a major blow to Texas Republicans who had been urged by President Donald Trump to redraw the boundaries of the state's congressional districts to maximise the number of Republicans who could be elected in order to protect his party's narrow US House majority.
The El Paso-based panel ruled in favour of civil rights groups that had challenged the map, finding that "substantial evidence shows that Texas racially gerrymandered" it.
The map was passed by the Republican-led state legislature and signed by Abbott, a Republican, in August.
The ruling criticised Abbott's actions to meet the Trump administration's demands, stating "the Governor explicitly directed the Legislature to redistrict based on race".
Democrats and civil rights groups in Texas had argued the new map further diluted the voting power of racial minorities in violation of federal law.
The court ordered that the 2026 congressional elections be carried out under a previous map, approved in 2021. Republicans control 25 of 38 US House seats in Texas under that 2021 map.
Abbott said the state will appeal the decision to the US Supreme Court.
Gerrymandering involves redrawing electoral district boundaries to marginalise a certain set of voters and increase the influence of others.
The US Supreme Court in 2019 forbade federal courts from intervening in cases involving gerrymandering done for partisan advantage. Gerrymandering predominantly driven by race remains illegal.
The NAACP civil rights group noted in a statement that "the state of Texas is only 40 per cent white, but white voters control over 73 per cent of the state's congressional seats".
Trump has demanded that Republican-led states redraw their congressional maps to help his party retain House control. Texas was at the forefront of the push, with Abbott signing the new Republican-backed map into law on August 29 with the aim of flipping as many as five Democratic-held seats.
"Any claim that these maps are discriminatory is absurd and unsupported by the testimony offered during ten days of hearings," Abbott said..
"This ruling is clearly erroneous and undermines the authority the US Constitution assigns to the Texas Legislature by imposing a different map by judicial edict."
"It's quite obvious that Texas's effort to redistrict mid-decade, before next year's midterm elections, is racially motivated," the NAACP said.
"The state's intent here is to reduce the members of Congress who represent Black communities, and that, in and of itself, is unconstitutional."
