A government spokesman said the court decision was "illegal and unconstitutional".
Next month’s election is regarded as a crucial test for Iraq's national reconciliation process ahead of a planned US military withdrawal.
Under Saddam, Iraq’s Sunni minority ran the country. With the dictator’s fall, they lost their power and complain they have been marginalised by the current Shia-led government.
An appeals panel ruled yesterday that candidates barred by the Justice and Accountability Commission, a body set up to ensure Saddam loyalists do not again infiltrate public life, could run in the 7 March vote.
Now the issue goes further. The Election Commission announced that it would appeal the panel’s ruling to the Supreme Court. The latter still has to decide on the lists running for office, and thus choose whether the panel’s decision is binding or not.
Iraqi Sunnis are celebrating the decision. Sunni lawmaker Saleh al-Mutlaq, who is on the exclusion list, said the decision was a "victory" for the Iraqi people.
Supporters of Prime Minister Nuri al-Maliki's State of Law coalition dismissed the decision.
Allies in the current government, Maliki and the INA will be rivals in the election.
Others suspect that the panel’s decision was the result of pressure or interference by the United States.