Los Angeles County Superior Court Judge Maren Nelson approved the firm's request for a new trial, citing errors and jury misconduct in the previous trial.
The judge also found that there was insufficient convincing evidence that Johnson & Johnson acted with malice and that the award for damages, granted two months ago, was excessive.
The decision will be appealed even though Eva Echeverria has died, said her lawyer, Mark Robinson Jr.
"We will continue to fight on behalf of all women who have been impacted by this dangerous product," he said in a statement.
Ms Echeverria claimed that Johnson & Johnson failed to adequately warn consumers about the potential cancer risks of using talcum powder.
She used the company's baby powder daily, beginning in the 1950s until 2016, and was diagnosed with ovarian cancer in 2007, according to court papers.
Ms Echeverria developed ovarian cancer as a "proximate result of the unreasonably dangerous and defective nature of talcum powder", she said in her lawsuit.
Her attorney contended that documents showed that Johnson & Johnson knew about the risks of talc and ovarian cancer for three decades.
The company said it welcomed the ruling.
"Ovarian cancer is a devastating disease - but it is not caused by the cosmetic-grade talc we have used in Johnson's Baby Powder for decades.
"The science is clear and we will continue to defend the safety of Johnson's Baby Powder as we prepare for additional trials in the US," spokeswoman Carol Goodrich said in a statement.
Similar allegations have led to hundreds of lawsuits against the New Jersey-based company. Jury awards have totalled hundreds of millions of dollars.
However, on Tuesday a Missouri appellate court threw out a £54.5 million award to the family of an Alabama woman who died, ruling that the state was not the proper jurisdiction for such a case.
The court cited a US Supreme Court ruling in June that placed limits on where injury lawsuits could be filed, saying state courts cannot hear claims against companies not based in the state where alleged injuries occurred.