The ruling echoes others that block the department from withholding funds to cities that refuse to cooperate with federal immigration agencies.
City officials have refused to give immigration agents access to prison inmates suspected of being in the country illegally or notify agents before the inmates are released.
In her ruling, U.S. Circuit Court Judge Marjorie Rendell said the Justice Department exceeded its power in attaching those conditions to the approximately $2.5 million in annual grants the city receives.
Mayor Jim Kenney said Philadelphia will continue to welcome immigrants, calling the Justice Department's efforts "an unconscionable attempt to bully the city and its residents."
An email seeking comment was sent to the Justice Department.
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