Ma Ying-jeou had always claimed his innocence

The ruling clears the way for him to represent the nationalist Kuomintang party in the presidential election due to be held in March.

Mr Ma had resigned as head of the Kuomintang Party following the indictment but denied any wrongdoing.

Prosecutors had been seeking to overturn a lower court ruling which cleared him of embezzlement.

Mr Ma was accused of misappropriating T$11.2m ($339,000) in funds while he was mayor of the capital, Taipei.

His faction of the Kuomintang - which governed Taiwan until 2000 - favours closer ties and more trade with China.

In the election he will face Frank Hsieh of the ruling Democratic Progressive Party, which seeks greater independence from the mainland.

Taiwan and China have been ruled by separate governments since the end of the Chinese civil war in 1949.

Beijing regards Taiwan as part of its territory and believes it should be reunited with the rest of China, if necessary by force.