Texas has been temporarily blocked from cutting funding to Planned Parenthood over secret videos made by anti-abortion activists in 2015.
US District Judge Sam Sparks issued an injunction to prevent the cash cut, which Republicans have championed.
It means the women's healthcare group, which is America's biggest abortion provider, will still get funding for its non-abortion services.
These include cancer screenings, and STD testing and treatment.
The move preserves health services for roughly 11,000 low-income women at 30 clinics in the state.
The funding in question comes from Medicaid - a joint federal and state programme which helps with medical costs for low-income Americans.
Texas is now the sixth state where the courts have kept Planned Parenthood eligible for Medicaid money, along with Arkansas, Alabama, Kansas, Mississippi, and Louisiana.
Republican-controlled states have pushed to cut Planned Parenthood's funding since summer 2015, when an anti-abortion group called the Center for Medical Progress accused it of selling aborted foetuses for a profit.
Planned Parenthood denied that, saying it is allowed to donate tissue from aborted foetuses to research firms for a procurement fee.
More than a dozen states investigated the profit claims, but found no evidence of illegal tissue harvesting or sales.
Human foetal tissue has been used in research since the 1930s, with current work focusing on diseases like AIDS and Parkinson's.
'More like a best-selling novel'
Judge Sparks, who was appointed by Republican former President George H W Bush, said the state of Texas had failed to provide evidence of wrongdoing by Planned Parenthood.
"A secretly recorded video, fake names, a grand jury indictment, congressional investigations - these are the building blocks of a best-selling novel rather than a case concerning the interplay of federal and state authority through the Medicaid program," the judge wrote.
"Yet, rather than a villain plotting to take over the world, the subject of this case is the State of Texas's efforts to expel a group of health care providers from a social health care program for families and individuals with limited resources."
Texas Attorney General Ken Paxton said his office would appeal the ruling.
"Today's decision is disappointing and flies in the face of basic human decency," he said in a statement.
Will Trump cost Planned Parenthood $400m?
The Texas decision comes amid questions over President Donald Trump's stance on Planned Parenthood.
On the campaign trail, the Republican billionaire said he would curb its $400m (£321m) federal funding.
He told a Republican debate in Texas: "I'm totally against abortion, having to do with Planned Parenthood [...] I would defund it because of the abortion factor."
He also described himself as "pro-life" - a term some anti-abortion campaigners use to define their views.
However, he acknowledged the group's extensive contribution to women's health services, adding: "Millions and millions of women - cervical cancer, breast cancer - are helped by Planned Parenthood. So you can say whatever you want, but they have millions of women going through Planned Parenthood that are helped greatly."
Last month, Mr Trump last month signed an executive order banning US funding to international groups that perform abortions or even provide information about abortions.
Vice President Mike Pence is strongly opposed to abortion. As Indiana governor, he signed an anti-abortion bill that is seen as one of the most restrictive in the US. The move prompted protesters to donate money to Planned Parenthood in his name.