The case has drawn wide international notice. In an Amnesty International campaign, thousands of people from around the world wrote appeals and signed petitions calling for Yorm Bopha's release.
Supreme Court Judge Kim Ponn said the Appeals Court must reinvestigate the case because the evidence was inconclusive.
"It has been clear from the very beginning of this case that Yorm Bopha has been targeted for her activism in the context of the (Boeung Kak) community's struggle for their rights," Ou Virak, president of the Cambodian Center for Human Rights, said in a statement. "While today's decision to temporarily release Bopha from jail is a welcome step, we must urge the Appeal Court to act quickly and to put an end to the suffering of Bopha and her family once and for all."
The Appeals Court in June upheld the municipal court's conviction of Yorm Bopha but suspended one year of her sentence.
Yorm Bopha, the mother of a 10-year-old son, told reporters in the courtroom that she was dissatisfied with the Supreme Court ruling because it meant she could be arrested again for her activism at any time.
"I am totally disappointed with the decision of the court today. I have never committed any crimes, and I wanted the court to drop all charges against me," she said.
Political analyst Kem Ley said the Supreme Court may have faced pressure to release Yorm Bopha because of international attention, as well as a sharp decline in the ruling party's share of the vote in recent parliamentary elections.
Land grabs and lack of judicial independence were key issues in the July elections, in which Prime Minister Hun Sen's ruling party lost 22 seats, leaving it with only a slight majority.