District Judge Derrick Watson has put an emergency stop on the travel order, which would have temporarily barred most refugees and travellers from six majority-Muslim countries from entering the US.
Watson believes the order violates part of the US Constitution because it represents religious discrimination, while other critics have claimed it is prejudicial against Muslims.
Trump described the policy as critical for national security
The news will come as a blow to President Trump whose first travel ban, signed on January 27, was also halted by a federal judge.
White House press secretary Sean Spicer has declined to comment.