Mr Trump invoked the same powers he used to impose a travel ban on Muslims that was upheld by the Supreme Court in June.
President Donald Trump has blamed US asylum rules for luring thousands of migrants a year from Central American countries.
Those delays increase the chances that caravan members could attempt to cross illegally by fording the Rio Grande or trekking through the desert to set foot on US soil and surrender to Border Patrol agents.
Individuals are now allowed to apply for asylum whether they identify themselves at ports of entry or bypass them illegally to gain entry into the US. "The US government should absolutely be encouraging the safe, orderly and efficient processing of asylum claims at ports of entry, but the way to do that is by providing sufficient resources to receive and process asylum seekers in a fair and humane manner".
The move would largely affect migrants from Central America's Northern Triangle - Guatemala, Honduras and El Salvador - who cross the U.S. border with Mexico to flee violence and poverty in their home countries. A US asylum officer then conducts an interview to determine if the person has a "credible fear" of persecution, in which case the applicant is typically assigned a court date and released from custody.
A number of lower courts had originally deemed the measure unconstitutional.
Once the plan goes into full effect, migrants entering at the US southern border would be eligible for asylum only if they report at official ports of entry, officials said.More news: Khashoggi's body was 'dissolved' after murder: Advisor to Turkish president
That status does not give foreigners a path to a green card or citizenship, and instead functions as a kind of provisional suspension of the deportation process, revocable at any time.
This is expected to put a dent in those streaming into an already overburdened system, officials said, noting that there is a backlog of more than 700,000 cases in the immigration courts.
"These restrictions are illegal - asylum is a legal right regardless of how someone enters the country", RAICES, an immigrant legal services organisation in Texas, said in a statement.
Speaking as he prepared to leave for Europe, Mr Trump said: "We need people in our country but they have to come in legally and they have to have merit".
The president can stop migration in the "national interest", a statement said. Claims have spiked in recent years, and there is a backlog of more than 800,000 cases pending in immigration court, with a wait time that can be almost two years.
The new rule is nearly certain to be challenged in courts.