NEW YORK (Reuters) - A federal appeals court on Wednesday overturned the corruption conviction of the former majority leader of the New York State Senate, but prosecutors vowed Joseph Burno would be charged again.

The Second Circuit Court of Appeals overturned Bruno's conviction on two counts of fraud.

"A reasonable jury could conclude that Bruno deprived New York citizens of his honest services by accepting payments that were intended to and did influence his conduct as a public official," U.S. Circuit Judge Barrington Parker wrote for the unanimous three-judge panel.

Bruno, 82, who for decades was one of the state's most powerful Republicans, was convicted in 2009 for failing to disclose conflicts of interest in consulting agreements he had with his business partner. The government argued that Bruno received $200,000 in consulting fees in exchange for political favors, in addition to receiving $40,000 disguised as payment for a racehorse.

A jury convicted Bruno on two counts of fraud, acquitted him on five others and failed to reach a verdict on one. The trial judge sentenced Bruno to two years in prison. He has remained free pending his appeal.

"We are delighted that the court of appeals agreed with us that Senator Bruno was charged with something that was not a crime and his case has to be dismissed," Bruno's lawyer, Abbe Lowell, said in a statement.

"We hope the U.S. Attorney will now let go of its pursuit of this 82-year-old man who has given so much to New York state and suffered for six years under wrongful charges."

But the U.S. Attorney's Office for the Northern District of New York said in a statement it would instead "work expeditiously" to present a new indictment against Bruno in federal court.

Bruno is among a long line of New York legislators and other state officials to be accused of corruption over the last decade. In an effort to end the steady march, Governor Andrew Cuomo signed a new ethics law that requires public officials to reveal the identity of clients who are seeking or have state contracts, grants or legislation as well as how much money they earn from those clients.

(Reporting by Terry Baynes; Editing by Jesse Wegman, Barbara Goldberg and Greg McCune)