The preliminary injunction issued by US District Judge David Campbell bars the state from enforcing Gov. Jan Brewer's policy of denying the licences to about 20,000 immigrants.
The injunction that takes effect on Monday was a formality that carries out instructions issued in July by the 9th US Circuit Court of Appeals.
The move in Arizona to deny the licences was a reaction to steps taken by the Obama administration in June 2012 to shield thousands of immigrants from deportation. Brewer's move marked the nation's most visible challenge to the Obama policy.
Brewer lashed out at yesterday's order, saying issuing licences is a state matter, not one for "the federal government or an unelected judiciary."
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"It is outrageous that Arizona is being forced to ignore longstanding state law and comply with a flawed federal court mandate that requires the state, at least temporarily, to issue driver licences to individuals whose presence is in violation of federal law, as established by the United States Congress," Brewer said in a statement.
The move by Obama applied to people younger than 30 who came to the US before turning 16; have been in the country for at least five continuous years; are enrolled in or have graduated from a high school or equivalent program; or have served in the military.
A group of 24 states, including Arizona, joined in a federal lawsuit alleging Obama overstepped his constitutional powers.