The ruling cited the cost of getting a driver's license and noted that in parts of Texas, applicants live 100 miles from issuing offices, whose limited hours mean people must forfeit a day of work.
Democratic state Rep. Trey Martinez Fischer, chairman of the Mexican American Legislative Conference, said "this deals with the despicable issues of discrimination, voter suppression."
The voter ID decision could set a precedent for legal challenges to similar laws in other states. South Carolina's strict photo ID law is on trial this week in front of another three-judge panel.
It also underscores a widespread push, largely by Republican-controlled legislatures and governors' offices, to impose strict identification requirements on voters. But Democrats say fraud at the polls is largely nonexistent and that Republicans are trying to disenfranchise minorities, poor people and college students - all groups that tend to vote Democratic.
State Attorney General Greg Abbott said he will appeal to the U.S. Supreme Court, "where we are confident we will prevail."
Texas Gov. Rick Perry said, "Chalk up another victory for fraud."
"Today, federal judges subverted the will of the people of Texas," Perry said.
Election administrators and scholars who study the issue generally say in-person fraud is rare because someone would have to impersonate a registered voter and risk arrest.
Though the ruling was hailed by civil-rights groups, it is unlikely to affect the battle over Pennsylvania's voter-ID law, said Rick Hasen, a law professor at the University of California-Irvine.
Part of the reason is Texas' special status: unlike Pennsylvania, it is one of the states that must obtain clearance from the Justice Department or a federal court toe enact election changes. Those states, most in the South, have a history of discriminating against voters of color.
Hasen said Texas had to prove in federal court that its law would not adversely affect minority voters. In Pennsylvania, the burden of proof is on the new law's opponents, who say it unduly burdens voters and thus violates the state constitution.
Last month, a Commonwealth Court judge upheld Pennsylvania's law. The ACLU and its allies appealed to the state Supreme Court, where oral arguments are scheduled for Sept. 13.
Staff writer Jessica Parks contributed to this article.