President Bush cannot hold U.S. citizen Jose Padilla, arrested in Chicago on suspicion of being part of a Al Qaeda "dirty bomb" plot, as an enemy combatant, a federal appeals court ruled Thursday.

That decision could force Padilla, a former Chicago street gang member who converted to Islam, to be tried in a criminal court.

The 2nd U.S. Circuit Court of Appeals (search), which split 2-1 over the ruling, ordered the suspect to be released from military custody within 30 days and suggested the government transfer him to civilian authorities.

Padilla could also be held as a material witness in connection with grand jury proceedings, the court ruled.

The three-judge panel said that because Padilla's detention had not been authorized by Congress, Bush had no power to hold him as an enemy combatant.

• Raw Data: Opinion, Padilla v. Rumsfeld (pdf)
• Raw Data: Dissent, Padilla v. Rumsfeld (pdf)
• Raw Data: Executive Order: 'Enemy Combatant' Status (pdf)

Padilla has been accused of plotting to detonate a "dirty bomb (search)," which would use conventional explosives to disperse radioactive materials. He was arrested at O'Hare International Airport in May 2002 as he stepped off a flight from Pakistan, and within days was moved to a naval brig in Charleston, S.C.

The government said Padilla himself had proposed the bombing to Abu Zubaydah (search), then Al Qaeda's top terrorism coordinator. Zubaydah was arrested in Pakistan in March 2002.

"As this court sits only a short distance from where the World Trade Center stood, we are as keenly aware as anyone of the threat Al Qaeda poses to our country and of the responsibilities the president and law enforcement officials bear for protecting the nation," Justices Rosemary S. Pooler and Barrington D. Parker wrote in their majority opinion.

"But presidential authority does not exist in a vacuum, and this case involves not whether those responsibilities should be aggressively pursued, but whether the president is obligated, in the circumstances presented here, to share them with Congress," they added.

District Judge Richard C. Wesley dissented, writing that the president as commander in chief "has the inherent authority to thwart acts of belligerency at home or abroad that would do harm to United States citizens."

In Washington, Justice Department spokesman Mark Corallo said the agency was reviewing the decision.

Padilla's lawyer applauded the decision.

"Under the Constitution, the president must carry out the laws; he cannot make the laws. That's really what the court found," lawyer Donna Newman told Fox News. "That should be news to nobody. There was no authority to this detention."

Newman said her legal team never argued Padilla could not be tried in civilian court, but simply that he could not be held by the military without being formally charged as an enemy combatant.

"All we argued was that the executive [branch] has overreached their powers," Newman said. "We have three branches of government, and that's what this court confirmed."

Newman said she was looking forward to meeting with her client as soon as he was released from military custody. Absent formal charges, Padilla's lawyers have not been allowed to confer with him.

"You can't hold people just because you'd like to," Newman added.

Chris Dunn, a staff attorney with the New York Civil Liberties Union (search), called the ruling "historic."

"It's a repudiation of the Bush administration's attempt to close the federal courts to those accused of terrorism," he said. The group had submitted a legal brief supporting Padilla.

Only two other people have been designated enemy combatants since the 2001 terrorist attacks: Ali Saleh Kahlah Al-Marri (search), a citizen of Qatar accused of being an Al Qaeda sleeper agent, and Esam Hamdi (search), a Louisiana native captured during fighting in Afghanistan.

In its ruling, the court said it was not addressing the detention of any U.S. citizens seized in the zone of combat in Afghanistan.

The Associated Press contributed to this report.