In April, the regional court in Brunswick, north Germany, said it could not hear the case against Christian B because the suspect's last known address was in a different part of the country.
However, a higher court in Brunswick ruled on Tuesday that there was insufficient evidence of another place of residence, after prosecutors appealed the decision.
“The regional court of Brunswick has local jurisdiction for the charges and must decide on the opening of proceedings,” the higher regional court said in a statement.
Christian B is already behind bars, serving a seven-year sentence for raping a 72-year-old US tourist in the Portuguese resort of Praia da Luz in 2005.
He is also the main suspect in the disappearance of the then three-year-old Maddie from a holiday apartment at Praia da Luz in 2007.
Brunswick prosecutors have said they believe Christian B murdered the girl, but he has yet to face any charges in the McCann case.
As part of their investigations, Brunswick prosecutors last year charged him with three counts of rape and two sexual offences against children in Portugal – unrelated to McCann – between 2000 and 2017.
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Judges in Brunswick must now decide whether to launch a trial over these charges.
Brunswick prosecutors welcomed Tuesday's ruling on the jurisdiction issue, with spokesman Christian Wolters saying it had also “brought clarity for the Maddie case”.
The investigations into the McCann case were still ongoing, Mr Wolters told AFP.
Maddie went missing a few days before her fourth birthday, as her parents dined with friends at a tapas bar near the apartment.
Despite a huge international manhunt and global media attention, no trace of her has been found and no one has been charged over her disappearance.
In 2020, German prosecutors revealed they were investigating Christian B in connection with the case, saying they had “concrete evidence” he killed Maddie.
In May, investigators carried out a three-day search at a reservoir in southern Portugal, at the request of German prosecutors, in the hopes of finding clues into Maddie's disappearance.
Brunswick prosecutors afterwards said “a number of objects” were secured during the search, but that it was too soon to determine any link with the McCann case.
“New investigation results, including those related to the search operation in Portugal, are not yet available,” Mr Wolters told AFP on Tuesday.