Judge Derrick Watson's ruling means Mr Trump will be barred from enforcing the ban on six mostly Muslim nations while it is contested in court.
In a lawsuit, the US state says the ban would harm tourism and the ability to recruit foreign students and workers.
Judge Watson made the ruling late on Wednesday after hearing arguments from attorneys for the state of Hawaii and the US Department of Justice.
The judge turned his earlier temporary restraining order into a preliminary injunction that would have a more lasting effect.
President Trump's executive order on 6 March would have placed a 90-day ban on people from Iran, Libya, Somalia, Sudan and Yemen and a 120-day ban on refugees.
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