The 2020 US Census will ask respondents whether or not they are US citizens for the first time since 1950.
A dozen US states are suing to block the move, saying it will deter immigrants from participating.
Trump administration officials say the data will help the government allocate resources and enforce voter laws designed to prevent discrimination.
The census is mandated under the US constitution and takes place every 10 years, counting every resident.
What are political implications?
Census data helps the US government calculate funding distribution and draw up districts for state and local elections.
Democratic states with large immigrant populations argue a citizenship question will produce undercounts because fewer people will participate.
They fear losing congressional and state legislature seats along with federal funding.
Kristen Clarke, president of the Lawyers' Committee for Civil Rights Under Law, told Reuters news agency the question exposed "xenophobic and anti-immigrant policy positions from [the Trump] administration".
What does Trump administration say?
The US Department of Commerce , which oversees the census, said on Monday night it had added the question after a request from the Department of Justice.
Commerce Secretary Wilbur Ross said the 1965 Voting Rights Act required a tally of citizens of voting age to ensure minority groups were not discriminated against.
He said even if the citizenship question had an effect on responses, "the value of more complete and accurate data derived from surveying the entire population outweighs such concerns".
Mr Ross' agency pointed out that other, smaller population surveys also ask respondents whether they are American citizens.
His agency has until the end of this month to submit a final list of 2020 census questions to Congress.
"The purpose is to determine individuals who are here," White House spokeswoman Sarah Sanders said on Tuesday.
"I think that it is going to determine the individuals in our country and provide information that allows us to comply with our own laws and procedures," she added.
President Donald Trump has previously argued, without providing evidence, that millions of illegal immigrants voted in the 2016 presidential election.
What do critics say?
New York and California, which have large immigrant populations, are among at least 12 states taking legal action to block the move.
California Attorney General Xavier Becerra applied early on Tuesday for a court to rule that such a census question would violate the US constitution.
He argued it would interfere with the US government's obligation to conduct a full count of the population.
New York Attorney General Eric Schneiderman said the citizenship question would "create an environment of fear and distrust in immigrant communities".
He also said it would "make impossible both an accurate Census and the fair distribution of federal tax dollars".
The top law enforcement officers of 19 states wrote to the commerce secretary in February to oppose the "tremendous harms" that they say the question would have.
#BREAKING: Filing suit against @realdonaldtrump's Administration over decision to add #citizenship question on #2020Census. Including the question is not just a bad idea — it is illegal: https://t.co/vW8sa7khq9— Xavier Becerra (@AGBecerra) March 27, 2018
By adding a citizenship question to the #2020Census, @SecretaryRoss has succumbed to the hateful, nativist views that are the hallmark of this administration & deliberately compromised the integrity of the #Census for political purposes. https://t.co/fVMRJYtiqK— Carolyn B. Maloney (@RepMaloney) March 27, 2018