Rejecting administration arguments that the public interest necessitated such spending, the US Court of Appeals for the Ninth Circuit said on Wednesday that those aims are "best served by respecting the Constitution's assignment of the power of the purse to Congress, and by deferring to Congress' understanding of the public interest as reflected in its repeated denial of more funding for border barrier construction".
The Justice Department didn't respond to a request for comment.
The administration sought to move the funds from the Defence Department to the Department of Homeland Security to build the barrier in portions of Arizona, California and New Mexico, Efe news reported.
A provision of the 2019 military appropriations law allows the Defence Secretary to transfer funds "for higher priority items, based on unforeseen military requirements", as long as "the item for which funds are requested has (not) been denied by the Congress".
Two non-profits the Sierra Club and the Southern Border Communities Coalition filed suit against the reallocation in February, alleging that the wall project would inflict environmental harms and reduce the quality of life along the border.
Last week, the federal district court in Oakland, California, which heard the suit, made permanent its injunction blocking the reallocation. Wednesday's ruling affirmed that decision.
Judges Richard Clifton, a George W. Bush appointee, and Michelle Friedland, an Obama appointee, formed the majority. While Judge Randy Smith, also appointed by Bush, dissented.
( With inputs from IANS )