The judgement by a three-judge bench of the federal appeals court in San Francisco is seen as a significant blow to the Trump Administration which has argued that executive order was a major step to prevent entry of radical Islamic terrorists in the country.
Trump immediately reacted to the court order in a tweet.
"SEE YOU IN COURT, THE SECURITY OF OUR NATION IS AT STAKE!" he wrote, indicating that he is deeply disappointed with the decision of the Ninth Court of Appeal.
The San Francisco court had held an oral hearing on the case early this week. The bench comprised William C Canby Jr, Richard R Clifton and Michelle T Friedland.
More From This Section
"We hold that the government has not shown a likelihood of success on the merits of its appeal, nor has it shown that failure to enter a stay would cause irreparable injury, and we therefore deny its emergency motion for a stay," the judges said in the unanimous order.
"In short, although courts owe considerable deference to the President's policy determinations with respect to immigration and national security, it is beyond question that the federal judiciary retains the authority to adjudicate constitutional challenges to executive action," the judges said.
In a brief interaction with reporters after the judgement, Trump described the ruling as a political decision.
"It's a political decision, and we're going to see them in court. This is just a decision that came down, but we're going to win the case," Trump was quoted as saying by NBC News.
Trump's political opponents and rights activists celebrated the court verdict.
"The Constitution wins," said Indian-American Congresswoman Pramila Jayapal, who is one of the leading Democratic lawmakers fighting Trump's executive order.