The San Francisco court's injunction on Wednesday overruled an earlier decision by a lower court on the same day that validated Trump's measure, in what happened to be a short-lived victory for the American leader.
With this new ruling, US District Judge Jon Tigar of the Northern District of California compelled the US government to continue to accept asylum requests from all applicants arriving at the border, according to Efe news.
The measure promoted by Trump last week restricted the possibility of seeking asylum at the US' southern border for immigrants who had passed through other countries, where they would now be required to apply for refuge.
As most asylum-seekers are from El Salvador, Honduras and Guatemala, they generally pass through Guatemala and Mexico on their way to the US.
The move virtually ended the possibility for these migrants to apply for asylum in the US.
Tigar said that the rule was "inconsistent with the existing asylum laws" passed by Congress.
During the hearing, Tigar said the government had provided no evidence that the asylum systems of Mexico and Guatemala could take care of tens of thousands of new Central American applicants.
Tigar found that the government's own evidence "affirmatively demonstrates that asylum claimants removed to Mexico are likely to be (1) exposed to violence and abuse from third parties and government officials; (2) denied their rights under Mexican and international law, and (3) wrongly returned to countries from which they fled persecution".
Since assuming office in January 2017, Trump made limiting asylum rights one of his political goals as he claims that immigrants take advantage of the existing system to enter and work in the US.
In fact, in recent months, the southern US border has witnessed an increase in the arrival of Central American asylum-seekers in family units.
The month of May saw the greatest influx since 2006, with more than 132,000 people arrested after crossing the border illegally.
Trump has tried several measures to discourage this type of immigration, such as separating parents from their underage children after crossing the border or returning asylum-seekers to Mexico while their cases were being decided.
( With inputs from IANS )