US district judge Royce Lamberth granted the injunction because he found that the doctors who challenged the policy would likely succeed because US law blocked federal funding of embryonic stem cell research if the embryos were destroyed.
"(Embryonic stem cell) research is clearly research in which an embryo is destroyed," Lamberth wrote in a 15-page ruling.
The Obama administration could appeal his decision or try to rewrite the guidelines to comply with US law.
The suit against the National Institutes of Health, backed by some Christian groups opposed to embryo research, had argued the administration's policy violated US law and took funds from researchers seeking to work with adult stem cells.
A justice department spokesperson said the administration was reviewing Lambert's decision and declined further comment.
The White House deferred comment to the justice department and representatives for NIH had no immediate comment.
The ruling is a setback for the Obama administration which had sought to increase such research and the issue could become a theme for Republicans on the campaign trail as they try to retake control of the US Congress in the November 2 elections.
Key to the case is the so-called Dickey-Wicker Amendment, which Congress adds to budget legislation every year. It bans the use of federal funds to destroy human embryos.
That was not an issue for the NIH until the discovery of human embryonic stem cells in 1998. In 2001, then-president George W Bush said he could only allow federal research money to pay for work done using a few batches, or lines, of the cells.
Many stem cell researchers objected, saying they could not do work needed to fulfill the promise of the powerful cells, which can give rise to all the tissues and cells in the human body. Privately funded researchers could do as they pleased, but federal funding is the cornerstone of such basic biological research.
New policy
As one of his first acts after taking office, Obama overturned that decision and the NIH set up a careful process for deciding which batches of human embryonic stem cells could be used by federally funded researchers.
The new guidelines do not allow the use of federal dollars to create the stem cells but do allow researchers to work with them if they are made by another lab.
"The Obama administration has attempted to skirt the law by arguing that they are only funding research after the embryos are destroyed," said Charmaine Yoest, head of the Americans United for Life group. "Today's sensible ruling reconfirms what we already knew, that administration policy is in violation of the law."
Dr James Sherley of Boston Biomedical Research Institute and Theresa Deisher of Washington-based AVM Biotechnology, who both work with adult stem cells, filed the original suit saying the guidelines violated the law and would also harm their work by increasing competition for limited federal funding. They both oppose the use of human embryonic stem cells.
The district court initially threw out the lawsuit, saying none of the parties had the right to bring the challenge. A US appeals court in June overturned that decision which led to Lambert's Monday ruling.
Sherley was not immediately available for comment.
"There is no after-the-fact remedy for this injury because the Court cannot compensate plaintiffs for their lost opportunity to receive funds," Lamberth wrote.
He found that the injunction would not seriously harm researchers who focus on human embryonic stem cells because it would preserve the status quo and not interfere with their ability to get private funding.
With the preliminary injunction in place, the two sides will likely present arguments and precedent to the judge over whether the guidelines can be permanently blocked or be allowed to go into effect.
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