The RIAA, which represents companies such as BMG, Sony Music, Warner Music Group and EMI, called Napster a "hijacker" of intellectual property and claimed it had cost the music industry more than $300m in lost sales.
The Recording Industry Association of America (RIAA) won a temporary injunction pending a trial over whether the company is violating copyright law.
The legal battle, which has already prompted congressional hearings, is being closely watched by internet music fans and the music industry and may have far-reaching implications.
The RIAA, which represents companies such as BMG, Sony Music, Warner Music Group and EMI, called Napster a "hijacker" of intellectual property and claimed it had cost the music industry more than $300m in lost sales.
But Napster argues its users are not violating copyrights by trading songs for free because they share files for non-commercial use.
Injunction
In reaching her decision to grant an injunction, generally used as an extreme measure, federal judge Marilyn Patel said: "The court rejects the argument that this will put Napster out of business."
"We'll comply with whatever the judge wants," said Napster's Hank Barry before the verdict. But the firm does plan to appeal.
Many experts believe settlement discussions will ultimately take place and the record industry will wind up embracing Napster's service with a more secure format.
On Monday it anounced a deal with software compnay Liquid Audio, which provides technology to sell music securely online.
Indeed it is unclear whether internet music file-swapping is so bad for the music industry after all.
Users of Napster software, which allows users to share digital music files, are likely to buy more records than non-Napster users, according to a recent survey of 2,200 Napster users.