The ultra-conservative Muslim group around German Salafist convert Sven Lau sparked public anger with their vigilante patrols in 2014 in the western city of Wuppertal.
A city court last December said the group would not face charges - but a higher court has now overturned that decision, announcing that eight members of the group could face trial, without setting a date.
It sided with state prosecutors who had argued the group's orange vests with the words "Sharia Police" on them constituted a violation of a ban on uniforms at public rallies.
The state high court in Düsseldorf also found that the law - which is aimed against militant street movements such as the early Nazi party - could be applied in this case.
The vests had signified the group's "shared political view" that traditional Islamic law could be applied on German streets, the court found.
This implied a lifting of the separation of church and state and also evoked "militant and intimidating" religious police units that operate in some Islamic countries.
Lau, one of Germany's most prominent Islamist preachers, was arrested in December on charges of supporting a "terrorist group" fighting in Syria.
Lau is accused of supporting and recruiting fighters for the Syria-based Army of Emigrants and Supporters, which Germany lists as a terrorist organisation.