The three-judge bench of the US Court of Appeals for the Ninth Circuit unanimously ruled against the revised ban.
The court in its ruling said that the executive order signed by Trump "exceeded the scope of the authority delegated to him by Congress" to oversee immigration.
"Immigration, even for the president, is not a one-person show," it said.
Since becoming the US president on January 20, Trump has struggled to deliver the campaign promise. His administration believes at this time it is difficult to verify people coming from the six countries.
Trump's critics, who have approached various courts, believe that such an executive order is targeted against a particular religion.
The Trump administration has opposed such an allegation.
Following the recent terrorist attacks in London, Trump had urged strong vetting process for people entering the US.
The White House has vowed to challenge these court orders. It believes the US president has the constitutional authority to decide who all can enter the country.
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