The constitutional court said the trial must go back to where it stood on April 19 and restart from that point.
On May 10, General Efrain Rios Montt, 86, was convicted of ordering the deaths of 1,771 people of the Ixil Maya ethnic group during his time in office in 1982-83.
He was sentenced to 80 years in prison. The former leader denies the charges.
The constitutional court on Monday threw out all proceedings in the case after the April day when there was a dispute between two judges about who should hear the case.
The ruling follows an appeal by Gen. Efrain Rios Montt’s defense lawyers, who argued that procedural errors had been committed.
The trial – which began in March – was beset by delays and even a temporary suspension.
During the hearings, dozens of victims gave harrowing testimony about atrocities committed by soldiers.
Gen. Efrain Rios Montt became the first former leader to be found guilty of genocide by a national tribunal in May.
Now, just days later, the jubilant scenes among indigenous campaigners in a packed court were contrasted sharply with the low-key press conference in which this latest legal twist was announced.
The decision to annul the sentence does not signal the end of the legal battle either for the prosecution or for Efrain Rios Montt as both sides will now start preparing to return to court to replay the final few weeks of the trial.
An estimated 200,000 people were killed in Guatemala’s 1960-1996 civil war, the vast majority of them indigenous Mayans.
Efrain Rios Montt’s 17 months in power are believed to have been one of the most violent periods of the war.
The former general abandoned politics in 2012, after serving in Congress for a number of years.
Efrain Rios Montt is now expected to leave the military hospital where he is currently being held and return to his home under house arrest.
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