The Philippine Supreme Court issued a temporary restraining order on Monday halting the signing of a territorial agreement between the government and Muslims, a senior official said.
The agreement between Manila and the Moro Islamic Liberation Front (MILF) was meant to be signed in Kuala Lumpur on Tuesday.
"There will be no signing tomorrow. I got a call from the (Supreme) court," Jesus Dureza, President Gloria Macapagal Arroyo's spokesman, told Reuters.
"I don't know what will happen next," Mohaqher Iqbal, the MILF's chief peace negotiator, told Reuters.
Catholic politicians in the south had asked the Supreme Court to halt the signing ceremony arguing that they had not been consulted on the deal, which they fear will carve up the southern island of Mindanao into Muslim enclaves.
"Do not build a Berlin Wall among the people in Mindanao," Celso Lobregat, mayor of the mainly Catholic city of Zamboanga, had earlier told a crowd of around 10,000 people.
The Supreme Court has asked both sides to present their cases on August 15.
Both the MILF and Manila have committed to agree a final deal by November 2009 but deadlines have consistently been missed in over a decade of talks, punctuated by violent conflict.
Thousands of Catholics had demonstrated in two southern Philippines cities on Monday against the agreement.