The ruling by the Stockholm administrative court forced the Swedish Post and Telecom Authority (PTS) to announce late Monday that it would postpone an auction of 5G network frequencies that was due to have taken place on Tuesday.
Huawei contests its ban as a security risk, claiming that it “lacks legal basis, violates fundamental human rights, violates fundamental EU legal principles… and is incorrect in substance”.
PTS has said that its October 20th ban, which also affects Chinese company ZTE, is in line with new legislation “to ensure that the use of radio equipment in these (5G network) bands does not cause harm to Sweden's security.”
The court ordered the PTS to submit its arguments so it could decide on the merits of the case.
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Huawei said that the ban, which prohibits operators in Sweden from acquiring new equipment and gradually remove Huawei kit already installed on their 5G networks, will cause irreparable harm to its business.
Sweden's move against Huawei comes after the United States piled pressure on allies to cut the firm from their telecommunications infrastructure.
Washington alleges that Beijing uses Chinese tech firms to spy for it – allegations which China and the companies deny.
After Britain in July, Sweden is the second country in Europe to outright ban Huawei equipment and the first in the EU to do so.
Sweden's Ericsson and Finnish firm Nokia are major competitors of Huawei in the supply of 5G equipment and infrastructure.