White House press secretary Karoline Leavitt has said a memo issued by the Office of Management and Budget (OMB) pausing federal grant, loan and other assistance programs was rescinded.
The freeze was announced on Monday and blocked by a federal court yesterday.
"This is NOT a rescission of the federal funding freeze. It is simply a rescission of the OMB memo," Ms Leavitt said in a post on X.
She added, "The President's EO's on federal funding remain in full force and effect, and will be rigorously implemented."
Meanwhile, Defense Secretary Pete Hegseth is removing the security detail for former top US military officer Mark Milley - a foe of President Donald Trump - and suspending his security clearance, the Pentagon said.
The retired general, who reportedly once labelled Mr Trump a "fascist" to a journalist, is the latest official-turned-critic to see their security protection pulled by the Trump administration since the president began his second term last week.
Mr Hegseth informed Mr Milley "that he is revoking the authorization for his security detail and suspending his security clearance as well," Pentagon spokesman John Ullyot said in a statement.
Mr Milley was named by the president during his first administration as the chairman of the Joint Chiefs of Staff, but their relationship deteriorated throughout the Republican's presidency.
Like two other officials who have also had their security details removed, Mr Milley is believed to be under threat from Tehran for overseeing the 2020 US drone strike ordered by Mr Trump that killed powerful Iranian general Qasem Soleimani.
"The secretary has also directed the (Department of Defense inspector general) to conduct an inquiry into the facts and circumstances surrounding Gen. Milley's conduct so that the secretary may determine whether it is appropriate to reopen his military grade review determination," Mr Ullyot said.
Mr Milley retired as a four-star general, but that process - if it goes forward - could potentially see him demoted in retirement.
In a sign of things to come, Mr Milley's portrait honouring his service as chairman of the Joint Chiefs was taken down at the Pentagon on the day that Mr Trump was sworn in.
The removal of the painting came after former president Joe Biden pre-emptively pardoned Mr Milley and other Trump opponents in one of his last acts in office.
Mr Trump has repeatedly promised "retribution" against his political opponents and threatened some with criminal prosecution, and Mr Biden said he took action to shield Mr Milley and others from "politically motivated prosecutions" under the new administration.
Mr Trump was enraged after Mr Milley told journalist Bob Woodward that the Republican was "fascist to the core" and a "dangerous person".
Mr Milley also revealed he had secretly called his Chinese counterpart after the 6 January 2021 attack on the US Capitol by Mr Trump's supporters to reassure Beijing that the United States remained "stable" and had no intention to attack China.
The president subsequently wrote on his Truth Social network that "in times gone by, the punishment would have been DEATH!" for Mr Milley.
The general stepped down as chairman in 2023 at a ceremony in which he took a final swipe at Mr Trump.
"We don't take an oath to a king, or queen, or a tyrant or a dictator," he said of American troops. "And we don't take an oath to a wannabe dictator."
Radical moves to overhaul the government
It comes as Mr Trump offered most federal workers the option to leave their jobs in exchange for eight months severance, in his most radical move yet to drastically overhaul the government.
The announcement, apparently inspired by Elon Musk's uncompromising management of his companies, followed an attempted freeze on federal funding also ordered by Mr Trump that opponents said were unconstitutional.
The emailed severance offer put the lives of US civil servants into disarray hours after the healthcare system for millions of low-income Americans was disrupted in the confusion of the decision to cut off federal aid.
A senior administration official told NBC News that the White House expects between five and 10% of federal staff to quit and make around $100 billion in savings.
The email to public workers resembled a message that was sent to Twitter employees when it was taken over by Mr Musk in late 2022 which asked for an emailed response if they wanted to stay at the company that was later renamed X.
Mr Musk, who spent over $270 million to help Mr Trump and other Republicans win election, has been tapped to lead a new Department of Government Efficiency aiming to make massive cuts to federal spending.
Federal workers wishing to take the deal were asked to reply to the email with the word "resign" written into the body of the email.
The moves were Mr Trump's latest steps since he took office a week ago, vowing to force the US government and its employees to back his right-wing political goals or face retribution.
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