In its ruling, the court rejected state and industry challenges to rules designed to clean up mercury, lead, arsenic and other dangerous air pollutants.
The new regulations were designed to remove toxins from the air that contribute to respiratory illnesses, birth defects and developmental problems in children.
Some industry groups have criticized the standards, saying the EPA was overstating the benefits. Industry groups argued it would cost billions of dollars annually to comply with the rules.
The EPA proposed the rules in 2011.
At the time they were brought forward, there were no limits on how much mercury or other toxic pollutants could be released from a power plant's smokestacks.
Tuesday's ruling is "a giant step forward on the road to cleaner, healthier air," said Fred Krupp, president of the Environmental Defence Fund, which was a party in the case.
The Environmental Protection Agency called the decision "a victory for public health and the environment."
"These practical and cost-effective standards will save thousands of lives each year, prevent heart and asthma attacks, while slashing emissions of the neurotoxin mercury, which can impair children's ability to learn," the EPA said.
Congress did not specify what types or levels of public health risks should be deemed a hazard under federal law.
By leaving this gap in the statute, Congress delegated to the EPA authority to give reasonable meaning to the term "hazard," said the appeals court opinion.