US district judge Jeannette Vargas on Friday issued a preliminary injunction that requires the federal government to release funds for a project to overhaul critical rail infrastructure in New York and New Jersey.

The Trump administration filed a notice of appeal on Sunday.

The transportation department said in September that it froze the funding pending a review of the project’s compliance with new federal prohibitions against race- and sex-based considerations in contracting decisions.

Trump offered last month to unfreeze the funds, a source said, in return for support from Democrats to rename Washington Dulles Airport and New York’s Penn Station after him. Democrats strongly criticised the offer.

The Gateway Project is intended to build a new commuter rail tunnel between Manhattan and New Jersey and repair a century-old tunnel used by more than 200,000 travellers and 425 trains daily.

Vargas handed down her ruling hours after New York and New Jersey said construction would halt for lack of funding.

The existing Hudson Tunnel, heavily damaged by Hurricane Sandy in 2012, needs frequent emergency repairs that disrupt travel on the nation’s most heavily used passenger rail line.

“We thank our partners in New York and New Jersey for taking action to help us access the federal funding for the Hudson Tunnel Project,” the Gateway Development Commission said in a statement on Friday after Vargas issued her ruling.

“As soon as funds are released, we will work quickly to restart site operations and get our workers back on the job,” it said.

The project was allocated about US$15 billion in federal support under former president Joe Biden.

Nearly US$2 billion has been spent so far.