US District Judge Kate Menendez in Minneapolis handed down the ruling on Saturday.
The lawsuit by the Minnesota Attorney General's Office sought to block or rein in a US Department of Homeland Security operation that sent thousands of immigration agents to Minneapolis-St Paul, sparking weeks of protests and leading to the killings of two US citizens by federal agents.
Meanwhile, Trump has ordered the Department of Homeland Security to "under no circumstances" get involved with protests in Democratic-led cities, unless they ask for federal help or federal property is threatened.
Cities must protect their own state and local properties, Trump wrote in a social media post. ICE and Border Patrol personnel will continue to guard federal buildings, Trump wrote on Truth Social.
The announcement came on Saturday, a day after thousands of protesters took to the streets of Minneapolis and across the country to demand the withdrawal of federal immigration agencies from Minnesota, following the fatal shootings of two US citizens.
The Trump administration had sent 3000 federal officers to the Minneapolis area as part of a crackdown on illegal immigration, and many of those officials found themselves facing off with protesters and activists.
It's the most recent example of Trump's willingness to use federal personnel in cities.
He has sent federal law enforcement officers or National Guard members to a number of cities largely governed by Democrats, including Los Angeles, Chicago, Washington, DC, and Portland, Oregon.
He has said the moves are necessary to enforce immigration laws and control crime. Local leaders in most of those cities have disputed that assertion.
Menendez noted in her ruling the federal appeals court recently stayed a much narrower injunction curtailing US Immigration and Customs Enforcement tactics in Minnesota.
"If that injunction went too far, then the one at issue here - halting the entire operation - certainly would," she wrote.
The lawsuit accused federal agents of racially profiling citizens, unlawfully detaining lawful residents for hours and stoking fear with heavy-handed tactics.
The Trump administration said the operation was aimed at enforcing federal immigration laws pursuant to the Republican president's policies. Some administration officials said the surge would end if Minnesota acquiesced to certain demands, including ending legal protections for people living in the US without legal authorisation.
Tensions in Minneapolis-St. Paul ramped up after the January 7 killing of Renee Good, who was shot in her car by a federal immigration agent in an incident captured in widely circulated bystander videos. The fatal shooting of Alex Pretti by a Border Patrol agent on January 24 further inflamed tensions.
The Trump administration defended the agents, saying they had acted in self-defence.
But videos of the events cast doubt on those narratives and fuelled calls for the agents to be criminally prosecuted. Federal authorities refused to co-operate with local law enforcement investigations of the killings.
Meanwhile, another judge ordered the release of a five-year-old boy and his father from a Texas detention centre where they were taken after being detained in Minneapolis last month.
Images of Liam Conejo Ramos, with a bunny hat and Spiderman backpack being surrounded by US Immigration and Customs Enforcement Officers, sparked even more outcry about the Trump administration's immigration crackdown in Minnesota.
It also led to a protest at the family detention centre and a visit by two Texas Democratic members of Congress.
US District Judge Fred Biery said in his ruling "the case has its genesis in the ill-conceived and incompetently-implemented government pursuit of daily deportation quotas, apparently even if it requires traumatising children".
A judge had previously ruled that the boy and his father, Adrian Conejo Arias, could not be removed from the US, at least for now.
