The court ruling said the US president "exceeded the scope of the authority delegated to him by Congress" in issuing the travel ban.
A US appeals court on Monday left in place a block on President Donald Trump's travel ban targeting citizens from six Muslim-majority nations.
The US Court of Appeals for the Ninth Circuit largely upheld an injunction on the ban issued by a lower court, but said the government was within its right to review the vetting process for people entering the country.
"Immigration, even for the president, is not a one-person show," the ruling said. "The president, in issuing the executive order, exceeded the scope of the authority delegated to him by Congress."
The decision came just ahead of a deadline for states challenging the ban to submit briefings before the US Supreme Court in response to the Trump administration's request that the nine justices hear the case.
The US Justice Department filed an emergency application to the Supreme Court on June 1, urging it to undo two lower court rulings blocking Trump's decision to prevent entry to travellers from Iran, Libya, Somalia, Sudan, Syria and Yemen for 90 days.
The Trump administration argues the ban is needed to ward off terrorist attacks in the country.
Critics say the ban is discriminatory and violates the US constitution by specifically targeting Muslim-majority countries.
Immigration authorities target Iraqis for deportation
The US government announced on Monday that immigration authorities had started arresting Iraqi immigrants ordered deported for serious crimes, after Iraq agreed to accept the deportees as part of a deal to remove it from Trump's travel ban.
Dozens of Iraqis in Michigan were among those targeted in immigration sweeps over the weekend, according to immigration attorneys and family members, some of whom feared they would be killed if deported to their home country where they have faced persecution.
"As a result of recent negotiations between the US and Iraq, Iraq has recently agreed to accept a number of Iraqi nationals subject to orders of removal," said Gillian Christensen, a spokesperson for US Immigration and Customs Enforcement.
Christensen said the agency arrested individuals who had criminal convictions for violations ranging from homicide to drug charges and had been ordered removed by an immigration judge. She declined to give more details, citing the ongoing nature of the operation.
An Iraqi official said Iraqi diplomatic and consular missions would coordinate with US authorities to issue travel documents for the deportees when they can be proven "to be 'Iraqi' based on our records and investigation."
The Iraqi official said around 100 people were arrested just in Detroit over the weekend.