Trump's efforts to build a wall along the southwest US border with Mexico to stem illegal immigration have been met with numerous court challenges.
The president declared a national emergency last year and turned to the Pentagon for funding after the House of Representatives refused to allocate all of the money he sought for construction of the wall.
In a statement, the White House described the ruling by the New Orleans-based Fifth Circuit as a "victory for the rule of law."
"The Fifth Circuit has lifted an illegitimate nationwide injunction entered by a lower court, and in doing so has allowed vital border wall construction to move forward using military construction funds," it said.
"We are committed to keeping our borders secure, and we will finish the wall."