The "sacred" bullock due to be slaughtered after it tested positive for TB, has been saved after a High Court judge quashed a government order.
Monks from the multi-faith Skanda Vale community in Carmarthenshire appealed against an assembly government ruling that the animal must be put down.
Their lawyers argued it would breach the Human Rights Convention.
The Welsh Assembly Government has now lodged an appeal, but will have to pay the costs of the hearing.
A spokesperson said: "We are disappointed with the judgment. Our aim and responsibility continues to be the protection of public and animal health.
"There are serious public and animal health issues in this case that need to be resolved urgently. As a result we are appealing the judgement as a matter of urgency."
Speaking outside the court, a Hindu monk at Skanda Vale, Brother Alex, said the community was "delighted".
"The judge has vindicated what has been our position all along, that there are viable alternatives to slaughtering an animal," he said.
"We are monks, and our life is about living in interaction with God, and this drama is to show people that humanity has to start taking the value of life a bit more seriously."
Earlier on Monday, His Honour Judge Gary Hickinbottom said: "This judgement does not, of course, guarantee that, as the community wish, Shambo will live until he dies a natural death.
"This judgement merely rules that the decisions of 3 May and 3 July to issue the slaughter notice and to pursue the slaughter under that notice were unlawful and will be quashed."
The assembly government, he added, "have adopted the wrong approach in this case" and would now have to reconsider the matter.
"They will be obliged to reconsider the public health objectives that underlie behind the surveillance and slaughter policy, and come to a view as to whether, in the reasonable pursuit of those objectives, the slaughter of this animal (or some less intrusive measure) would be proportional given the serious infringement of the community's rights under Article Nine that slaughter would involve."
The decision came after lawyers for both parties laid out their arguments in a hearing in Cardiff on Thursday.
Judges had adjourned the hearing to consider over the weekend whether there should be a judicial review on the proposed slaughter.
David Anderson QC for the Hindu monks at the Skanda Vale community near Llanpumsaint, said Shambo was an animal of "considerable religious importance" and as such a policy devised for farm animals could not be applied to it.
He said members of the community believed that slaughtering the six-year-old black Friesian would be "a desecration of the temple".
He referred to Article Nine of the European Convention of Human Rights which guarantees "the right to freedom of thought, conscience and religion" and the right to "to manifest religion or belief in worship".
But Clive Lewis QC for the assembly government, said bovine tuberculosis was an infectious disease capable of transmission to other animals, including wildlife and humans.
He said the matter had been carefully considered by the Rural Development Minister Jane Davidson, who again ordered Shambo's destruction earlier in July after taking advice from the chief veterinary officer and the chief medical officer.
Mr Lewis also told the court there was no accepted treatment for bovine TB in the UK.
A campaign to save Shambo has included an online petition which has attracted more than 20,000 names. A video stream has also been broadcast live from Shambo's pen in the temple.