"The Amsterdam appeals court has ordered the prosecution of member of parliament Geert Wilders for inciting hatred and discrimination, based on comments by him in various media on Muslims and their beliefs," the court said in a statement.
"The court also considers appropriate criminal prosecution for insulting Muslim worshippers because of comparisons between Islam and Nazism made by Wilders," it added.
The court's ruling reverses a decision last year by the public prosecutor's office, which said Mr Wilders's comments had been made outside parliament as a contribution to the debate on Islam in Dutch society and that no criminal offence had been committed.
Prosecutors said on Wednesday that they could not appeal against the judgement and would open an investigation immediately.
Gerard Spong, a prominent lawyer who pushed for Mr Wilders's prosecution, welcomed the court's decision.
"This is a happy day for all followers of Islam who do not want to be tossed on the garbage dump of Nazism," he told reporters.
In March 2008, Mr Wilders posted a film about the Koran on the internet, prompting angry protests across the Muslim World.
Geert Wilders speaking on BBC Hardtalk in August 2008
The opening scenes of Fitna - a Koranic term sometimes translated as "strife" - show a copy of the holy book followed by footage of the bomb attacks on the US on 11 September 2001, London in July 2005 and Madrid in March 2004.
Pictures appearing to show Muslim demonstrators holding up placards saying "God bless Hitler" and "Freedom go to hell" also feature.
The film ends with the statement: "Stop Islamisation. Defend our freedom."
Dutch Prime Minister Jan Peter Balkenende said at the time that the film wrongly equated Islam with violence and served "no purpose other than to offend".
A year earlier, Mr Wilders described the Koran as a "fascist book" and called for it to be banned in "the same way we ban Mein Kampf", in a letter published in the De Volkskrant newspaper.
Mr Wilders has had police protection since Dutch director Theo Van Gogh was killed by a radical Islamist in 2004.
Correspondents say his Freedom Party (PVV), which has nine MPs in the lower house of parliament, has built its popularity largely by tapping into the fear and resentment of Muslim immigrants.
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