The American Civil Liberties Union (ACLU) filed a case in response to the order issued on Friday.
It estimates that 100-200 people are being held at airports or in transit. Thousands of people have been protesting at US airports over
Mr Trump's clampdown on immigration.
His executive order halted the entire US refugee programme and also instituted a 90-day travel ban for nationals from Iran, Iraq, Libya, Somalia, Sudan, Syria and Yemen.
Those who were already mid-flight were detained on arrival - even if they held valid US visas or other immigration permits.
Defending his move, Mr Trump early on Sunday tweeted: "Our country needs strong borders and extreme vetting, NOW."
On Saturday, amid protests and court challenges, he told reporters the order was "working out very nicely. You see it at the airports, you see it all over." Other executive orders issued by Mr Trump on Saturday were:
A ban on administration officials ever lobbying on behalf of a foreign government
An order to Defence Secretary Jim Mattis to come up with a plan within 30 days to defeat so-called Islamic State
Restructuring the National Security Council with a key role for Steve Bannon, the former populist right-wing media executive who is now Mr Trump's top strategist
'Irreparable injury'
The ruling from federal Judge Ann Donnelly, in New York, prevented the removal from the US of people with approved refugee applications, valid visas, and "other individuals... legally authorised to enter the United States".
The emergency ruling also said there was a risk of "substantial and irreparable injury" to those affected.
Her ruling is not on the constitutionality of Mr Trump's executive order. What will happen to those still held at airports remains unclear.
In its response, the Department of Homeland Security said it would continue to enforce the measures that on Saturday had affected "less than 1% of the more than 325,000 international air travellers who arrive every day".
It added that the US government "retains its right to revoke visas at any time if required for national security or public safety".
Ali worked for three years as an interpreter for the US Army and gained admittance to the US through a Special Immigrant Visa, reserved for Iraqi and Afghan nationals who face threats of violence for working for Americans during the conflicts there.
He now has a green card, and returned to Iraq for his father's funeral, only to be delayed for hours for questioning at Dulles.
The case was brought early on Saturday on behalf of two Iraqi men detained at JFK Airport in New York.
One worked for the US military in Iraq. The other is married to a former US military contract employee.
Both have now been released. Another court hearing is set for February. Tweet from ACLU national: On week one, Donald trump suffered his first loss in court.
"We are not terrorists. We are not bad people," said Ali. "It's so hard. I hope they will change their minds on this position."
Lee Gelernt, deputy legal director of the Immigrants Rights Project, who argued the case in court said that some people had been threatened with being "put back on a plane" later on Saturday.
Mr Gelernt also said the judge had ordered the government to provide a list of names of those detained under the order.
Judges elsewhere in the US have also ruled on the issue:
In Boston, a judge decided two Iranian nationals, professors at the University of Massachusetts, should be released from detention at Logan International Airport
An order issued in Virginia banned, for seven days, the deportation of green card holders held at Dulles Airport and ordered the authorities to allow access to lawyers.
A Seattle judge issued an emergency stay of removal from the US for two people Criticism of Mr Trump's decision has been growing louder outside the US. Iran and Iraq are threatening a reciprocal ban on US citizens entering the country. Chancellor Angela Merkel of Germany issued a statement saying "even the necessary, determined fight against terrorism does not justify placing people of a certain origin or belief under general suspicion".
Canadian Prime Minister Justin Trudeau tweeted that his government remained committed to welcoming "those fleeing persecution, terror and war".
A spokesperson for UK PM Theresa May said she "did not agree" with the restrictions, and French independent presidential candidate Emmanuel Macron tweeted: "I stand with the people fleeing war and persecution".
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