The issue could return to the Justices after lower courts rule more definitively on the challenge being pursued to the new restrictions by four organizations that handle legal claims for those seeking asylum.
Administration officials said Trump had the authority to institute the new rule in the same way he had authority to implement a travel ban to people from majority Muslim countries.
Chief Justice John Roberts provided the critical vote against the administration Friday, siding with the four liberal justices. Trump's two Supreme Court appointees, Brett Kavanaugh and Neil Gorsuch, joined the court's two other conservatives in dissent.
"The 9th Circuit, we're going to have to look at that", Trump said, before adding that "every case" that goes through that circuit results in "an automatic loss" for his administration. "And as much as we might be tempted to revise the law as we think wise, revision of the laws is left with the branch that enacted the laws in the first place - Congress". The 9th Circuit Court of Appeals in a 2-1 decision agreed and said that Trump's order should remain on hold pending further proceedings.
Tigar's ruling prompted Trump to criticize him as an "Obama judge", and Trump predicted that the government would "win that case in the Supreme Court of the United States".
The U.S Supreme Court has just dealt a significant blow to President Donald Trump's attempt to thwart asylum-seekers.
Last month, Roberts had rebuked Trump for his criticism of the judiciary and spoken out strongly in defense of its independence: "We do not have Obama judges or Trump judges, Bush judges or Clinton judges", Roberts had said.
The government told the justices that if Tigar's order stays in place while the appeal moves through the federal courts, it will frustrate "a coordinated effort by the President, the Attorney General, and the Secretary to re-establish sovereign control over the southern border, reduce illegal and risky border crossings, and conduct sensitive and ongoing diplomatic negotiations".
The appeal was made by the administration against a ruling by a California-based federal judge.
The ruling comes as Trump continues his efforts to sow fear over the thousands of refugees and migrants who have made their way from Central America to the US-Mexico border since mid-October.
Mr Trump's proclamation stated that mass migration on the border had precipitated a crisis and he was acting to protect the U.S. national interest.
Domestic immigration policy was crafted to alter American asylum laws that have given people fleeing persecution and violence in their homelands the ability to seek sanctuary in the US.
The administration hopes the long waiting time for a ruling on asylum applications, and being forced to stay in Mexico, will deter others from making the long trip to the border from their home countries.