The president declared his administration would be "leading by example" on religious liberty in the US
"We are giving our churches their voices back. For too long, the federal government has used the power of the state as a weapon against people of faith, bullying and even punishing Americans for following their religious beliefs. It's been happening," he said.
Religious leaders prayed in the Rose Garden just before Trump signed the executive order.
"Faith is deeply embedded into the history of our country, the spirit of our founding and the soul of our nation," Trump said at a National Day of Prayer event with religious leaders and White House staff.
"We will not allow people of faith to be targeted, bullied or silenced anymore," he said.
The executive order, called "Promoting Free Speech and Religious Liberty," also gives "regulatory relief" to companies that object to an Obamacare mandate for contraception in health care.
While an earlier draft of the religious liberty order reportedly would have let federal contractors discriminate against LGBT employees based on faith beliefs, today's version did not include such provisions.
This executive order directs the Internal Revenue Service not to unfairly target churches and religious organisations for political speech.
"With this executive order, we are ending the attacks on your religious liberty, and we are proudly reaffirming America's leadership role as a nation that protects religious freedom for everyone," Trump said.
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