A new review must be held to decide whether Snowtown serial killer James Vlassakis is released on parole, a court has ordered.

A decision to block his parole was set aside by South Australia's Court of Appeal on Thursday and the Parole Board's decision to free him was reinstated.

But Parole Administrative Review Commissioner Michael David KC has been ordered to review the case again and Vlassakis remains in custody.

Last August, the Parole Board agreed to release Vlassakis, who pleaded guilty to four of the 11 murders between 1992 and 1999, but Attorney-General Kyam Maher requested a review of the decision.

Mr David subsequently found the board underestimated the effect of the gravity of Vlassakis's criminal behaviour and releasing him would be a risk to the community.

The Parole Board sought a judicial review of Mr David's decision, and on Thursday the Court of Appeal found he had fallen into jurisdictional error by departing from the board decision.

"His reasons for doing so were not capable of amounting to cogent reasons," the judges wrote.

The commissioner had also erred by "impermissibly substituting his own view of the gravity of the offences" for the view expressed by the court that sentenced him.

The judges noted the "proceedings and the questions of law arising in this case do not decide whether Vlassakis should be released on parole".

"While the Supreme Court can judicially review whether the statutory processes have been undertaken according to law, it is not for this court to decide whether any prisoner should or should not be released on parole."

Vlassakis, who appeared at the hearing via video link, showed no visible reaction to the complex judgment, with its implications on his continued imprisonment not immediately clear.

The attorney-general said he cannot comment on the judgment at this stage because of Corrective Services Act confidentiality requirements.

Vlassakis was a key prosecution witness against John Bunting and Robert Wagner, who were found guilty of 11 and 10 murders respectively.

The bodies of eight of their victims were found dismembered in barrels inside a disused bank vault in Snowtown, north of Adelaide, in 1999.

In considering the review in May, the Court of Appeal had revoked the 25-year-old suppression order that banned publication of Vlassakis' image and description.

During those proceedings, the court heard submissions from Vlassakis's longtime counsel Lindy Powell KC, and SA Solicitor-General Mike Wait SC on behalf of the government.

The solicitor-general said Mr David's decision to block Vlassakis's release on parole was based on the Parole Board not properly taking the gravity of his crimes into consideration.

It also heard from Parole Board counsel Dick Whitington KC, who told the court that by blocking parole Mr David had "effectively re-sentenced" Vlassakis.

Vlassakis was 18 when he became involved in the killings in 1998 and was sentenced to life with a minimum term of 26 years, which expired last August.

Parole Board chief Frances Nelson previously said Vlassakis did not represent a risk to the community and would be sent to the Adelaide pre-release centre for up to 12 months to undergo a resocialisation process.