"We hold that any presidential immunity from state criminal process does not bar the enforcement of such a subpoena", the 2nd Circuit Chief Judge Robert A. Katzmann wrote.
Vance's office has agreed not to enforce the subpoena while Trump petitions the Supreme Court.
In the subpoena to Trump's longtime accountant, Vance's lawyers call for financial and tax records of entities and individuals, including Trump, who engaged in business transactions in Manhattan. The issue raised in this case go to the heart of our Republic.
Though the ruling was narrow - the court made clear it wasn't weighing in on whether Trump could be prosecuted or himself required to turn over records - it is still a significant blow to the president. Moreover, they claim he's exempt from state criminal law.
Because there are multiple ongoing lawsuits surrounding the president's hidden tax returns, it's easy to get confused about the various cases.
The president's team is attempting to shield his tax returns from the Manhattan District Attorney's office, which subpoenaed them as part of an investigation into "hush payments" to Stormy Daniels and Karen McDougal.
Trump lost the initial case before a federal district court on October 7 before making his appeal to the 2nd Circuit Court of Appeals.
"We view the entire subpoena as an inappropriate fishing expedition not made in good faith", William S. Consovoy, one of Mr. Trump's lawyers, told the appeals panel at oral arguments.
"Even assuming, without deciding, that a formal criminal charge against the President carries a stigma too great for the Constitution to tolerate, we can not conclude that mere investigation is so debilitating", the court said, adding that such a decision would be hard to square with legal precedents from investigations into President Richard Nixon.
Monday's decision roundly rejected that argument, even while staying narrowly focused on the third party subpoena the court was considering.
The New York-based appeals court is considering Trump's appeal of a May ruling by a different judge in Manhattan to reject the president's request to block his bankers at Deutsche Bank AG and Capital One Financial Corp. from turning over his financial records to Congress.
Until the president leaves office, "his exemption from criminal proceedings would extend not only to matters arising from the performance of the President's duties and functions in his official capacity, but also to ones arising from his private affairs, financial transactions, and all other conduct undertaken by him as an ordinary citizen both during and before his tenure in office", the ruling said.
The president is also fighting efforts by the House of Representatives to obtain his tax records. The ruling does not mean that Trump's tax records will be turned over immediately.
Trump's attorneys claim that as president, he is immune from criminal investigation.