The California Air Resources Board adopted the low-carbon fuel standard as part of the state's 2006 global warming law.
A judge ruled Thursday that the rules violated the U.S. Constitution's commerce clause by discriminating against crude oil and biofuels producers outside the state.
Members of the board plan to ask a judge to stay the ruling and appeal if necessary to the 9th U.S. Circuit Court of Appeals.
Out-of-state fuels producers hailed the decision as a win for California drivers.
Beginning this year, the standard has required petroleum refiners, companies that blend fuel and distributors to gradually increase the cleanliness of the fuel they sell in California.
The board has previously said the low-carbon mandate will reduce the state's dependence on petroleum by 20 percent and account for 10 percent of California's goal to cut greenhouse gas emissions by 2020.
The regulation does not mandate specific alternative fuels. However, it does assign a so-called carbon-intensity score to various fuels.
By 2020 all vehicles fuels, on average, must be 10 percent less carbon-intensive than gasoline is now.
The Associated Press contributed to this report.