Since November, Chinese-backed Canyon Bridge Capital Partners has been seeking approval for a $1.3bn (£984m) deal to buy Lattice Semiconductor.
Canyon Bridge said it was "disappointed" by the decision.
The order comes as the US has been toughening its stance on China's intellectual property practices.
In its announcement, the Trump administration said it was concerned about the "potential transfer" of intellectual property from Lattice. It also cited the use of Lattice products by the US government.