Adrian Jones was jailed for bludgeoning Kelly Hyde, 24, to death with a barbell in Carmarthenshire in 2007.
Jones, from Pantyffynnon, died from natural causes in prison last year.
The Criminal Cases Review Commission (CCRC) said it had referred the conviction for appeal following new evidence relating to his mental state.
It said Jones had accepted his responsibility for the killing and applied for a review of his case in September 2015.
Ms Hyde, from Ammanford, disappeared while walking her pet whippet on 27 September 2007 after dropping her car off at a garage for its MOT.
Her body was found near the town three days later after a search involving police officers and mountain rescue teams.
Jones was arrested within a week of her death and a search of his home found a dog lead belonging to her, which was stained with her blood.
He was jailed for a minimum of 11 years and 79 days at Swansea Crown Court in 2008.
Since Jones’ death, his family have pursued a review on his behalf.
“The commission has conducted a detailed review of the case which has included considering reports from a number of psychiatric experts and commissioning its own psychiatric expert evidence,” the CCRC said in a statement.
It said new psychiatric evidence relating to his mental state at the time of the killing raises “a real possibility that the Court of Appeal will now quash the murder conviction and substitute a conviction for manslaughter on the grounds of diminished responsibility”.
Mr Jones had previously tried to appeal his conviction but it was dismissed in October 2009.