Seattle-based US District Judge John Coughenour issued a temporary restraining order at the urging of four Democratic-led states -Washington, Arizona, Illinois and Oregon- preventing the administration from enforcing the order. Trump had signed the order on Monday, his first day back in office.
The judge, an appointee of Republican former President Ronald Reagan, dealt the first legal setback to the hardline policies on immigration that are a centerpiece of Trump's second term as president.
"Obviously we'll appeal," Trump said of Coughenour's ruling, Reuters reported.
Trump's executive order had directed US agencies to refuse to recognize the citizenship of children born in the United States if neither their mother nor father is a US citizen or lawful permanent resident.
"I am having trouble understanding how a member of the bar could state unequivocally that this order is constitutional," the judge told a US Justice Department lawyer defending Trump's order. "It just boggles my mind."
The states argued that Trump's order violated the right enshrined in the citizenship clause of the US Constitution's 14th Amendment that provides that anyone born in the United States is a citizen.
Under Trump's order, any children born in the United States after February 19 whose mother and father are not American citizens or lawful permanent residents would be subject to deportation and would be prevented from obtaining Social Security numbers, various government benefits and the ability as they get older to work lawfully.
More than 150,000 newborn children would be denied citizenship annually if Trump's order is allowed to stand, according to the Democratic-led states.