Allegheny County Judge Lawrence O'Toole ruled in 2010 that 61-year-old Connie Williams should, instead, serve life in prison. The justices agreed in a decision Tuesday.
Williams was convicted and sentenced to death in 2002 for the 1999 killing of Frances Williams, whose head, hands and feet he cut off.
Attorneys for the Federal Community Defender Office in Philadelphia filed a motion in 2008 seeking to vacate the death sentence.
Williams had previously served seven years in prison for the 1974 stabbing murder of his girlfriend's landlord.
It was not immediately clear if county prosecutors will appeal to federal court.