The former Penn State assistant football coach was sentenced in 2012 to 30 to 60 years, but a Superior Court panel said that included the improper application of mandatory minimums.
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In a 119-page opinion , the appeals panel struck down argument after argument that lawyers for Sandusky, 75, had made in seeking a new trial.
His defense lawyer, Al Lindsay, said he was disappointed but will ask the state's highest court to reconsider.
Lindsay said he was unsure if the new sentencing is likely to result in a substantially different sentence.
"I suppose it depends on the judge and what happens before the sentencing and after the sentencing," Lindsay said.
The U.S. Supreme Court has indicated that jurors must consider anything that could result in a longer sentence, and such elements must be proven beyond a reasonable doubt. A judge, not jury, sentenced Sandusky.
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The state attorney general's office said it was pleased that Sandusky's convictions remained intact.
"The Superior Court has agreed with our office that it was proper for the court below to reject Sandusky's claims," said Joe Grace, a spokesman for the prosecutors. "We look forward to appearing for the new sentencing proceedings and arguing to the court as to why this convicted sex offender should remain behind bars for a long time."
Victims testified at his trial that Sandusky subjected them to a range of abuse, from grooming to violent sexual attacks. Sandusky has consistently maintained his innocence.
Lindsay said Sandusky asked him to release a statement vowing to "not rest until the public understands what has happened and decision-makers acknowledge the injustice."
"It's time to unmask those who have been deceitful and dishonest," the statement read. "It's time to expose those who have hidden personal agendas. Now is the time to present the 'real scandal' and all the damage that has been done. What has happened is a travesty. What will happen will be our legacy."
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Sandusky's arrest led the university to push out Hall of Fame head coach Joe Paterno and then-university president Graham Spanier.
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