The decision by the recently-instated quasi-independent board means Mr Trump is still barred from using both Facebook or Instagram.
However it did say the company must reassess his indefinite suspension.
In a statement following the ruling, Mr Trump said that actions by Facebook, well as Twitter and Google, are "a total disgrace and an embarrassment to our Country."
Facebook indefinitely blocked Mr Trump's access to his accounts over concerns of further violent unrest following the storming of the US Capitol by supporters of the former president on January 6.
A large mob attacked the building as Congress was voting to certify Joe Biden’s election win last November. Five people died shortly after or during the mayhem.
The former president had earlier urged his supporters to “fight like hell” to overturn his defeat, making unsubstantiated claims of electoral fraud.
Videos shared across the 74-year-old's social accounts called those who stormed the Capitol "patriots" and said: "We love you."
At the time of the suspension, Facebook Chief Executive Mark Zuckerberg said in a post that "the risks of allowing the President to continue to use our service during this period are simply too great."
The company later referred the case to its recently established board to decide whether to uphold the ban or restore Mr Trump.
While uploading the suspension, the board faulted Facebook for the way it made the decision.
"It was not appropriate for Facebook to impose the indeterminate and standardless penalty of indefinite suspension," it said.
The board said Facebook has six months to reexamine the "arbitrary penalty" it imposed on January 7 and decide on another penalty that reflects the "gravity of the violation and the prospect of future harm."
The board said the new penalty must be "clear, necessary and proportionate" and consistent with Facebook's rules for severe violations.
It added if Facebook decides to restore Mr Trump's accounts, the company must be able to promptly address further violations.
Sir Nick Clegg, Facebook's vice president of global affairs and communications, said the firm is "pleased" the board recognised the "unprecedented circumstances".
"While the board has not required Facebook to immediately restore Mr Trump's accounts, it has not specified the appropriate duration of the penalty," he said.
"We will now consider the board's decision and determine an action that is clear and proportionate. In the meantime, Mr Trump's accounts remain suspended."
People can submit an appeal to the panel if they think content was wrongly removed.
The board takes on a handful of cases every few months and assesses Facebook's initial verdict.
Their conclusions are binding and even overrule Mr Zuckerberg, meaning Facebook has seven days to reverse any removals - unless doing so could break the law.
The board is made up of a number of experts from various fields ranging from government and journalism, to digital rights and law.
Former Guardian editor-in-chief Alan Rusbridger and Denmark's former prime minister Helle Thorning-Schmidt are among its members.
Mr Trump has also been permanently banned from Twitter.
A day before the Facebook announcement, Mr Trump unveiled a new blog on his personal website, "From the Desk of Donald J. Trump."
Trump aides have since teasing his plans to launch his own social media platform.