Under the rule, which has two versions, immigrants cannot get green cards or visas if immigration officials establish they would depend on public benefits like food stamps.
The version pertaining to permanent residency is being implemented by Department of Homeland Security, while the Department of State enforces the part that applies to visa applicants.
The Department of Homeland Security started enforcing the policy in February.
But in two rulings on Thursday, Justice George Daniels of the district court in New York, ordered the administration to suspend the rule due to the coronavirus pandemic.
Noting the additional risk posed by the virus, Daniels specifically ordered the rule be put on hold for immigrants residing legally in the U.S. until the end of the COVID crisis.
In spite of several legal challenges, the Trump administration has been trying to expand the policy to Medicaid and certain housing benefits.
In March, the Citizenship and Immigration Services issued a notice explaining that immigrants seeking treatment for coronavirus would not be affected.
But the judge dismissed the clarification as “plainly insufficient”, noting that confusion might arise if Medicaid was used for treatment of illnesses in addition to coronavirus.
“This chilling effect, in turn, undoubtedly hampers efforts to contain the virus and protect the public health of residents across the country,” Daniels wrote in his order.
Daniels also said the administration went too far in effectively redefining what it means to be a “public charge.”
The judge declared that the expanded list of poverty assistance programme was “plainly outside the bounds” of the law