Claiming "preeminent authority" to write the laws on immigration, the Justice Department filed suit to block Arizona from enacting its own.
"Setting immigration policy and enforcing immigration laws is a national responsibility," said Attorney General Eric Holder. "Seeking to address the issue through a patchwork of state laws will only create more problems than it solves."
The challenge, although not unexpected, appeared certain to reignite a searing national debate on immigration and send the midterm election season into fraught new territory.
"The American people must wonder whether the Obama administration is really committed to securing the border when it sues a state that is simply trying to protect its people by enforcing immigration law," Republican Sens. John McCain and Jon Kyl, both of Arizona, said in a joint statement criticizing the lawsuit.
About 20 Republican House members also protested the lawsuit in a letter to Holder, saying "it reveals contempt" for the majority of Americans who support the law.
The Obama administration is asking an Arizona federal court to toss out a new set of laws passed in the state legislature and signed by Republican Gov. Jan Brewer, calling them unconstitutional.
"The United States Constitution forbids Arizona from supplanting the federal government's immigration regime with its own state-specific immigration policy," the lawsuit says.
The Arizona law, set to go into effect July 29, requires officers to check the immigration status of those they detain for other offenses. The law also requires immigrants to carry documents proving they are in the country legally.
Other states had been eyeing similar laws, complaining the Obama administration has come up short on enforcement.
President Obama has said the law has the potential to be discriminatory -- and has called for an overhaul of immigration policy, including more border security and a path to citizenship for the estimated 11 million immigrants living here illegally.
The move coincides with Obama's dip in the polls among Hispanic voters -- a key Democratic voting bloc the party will need in November.
A new USA Today/Gallup poll found Americans split over whether the federal government should prioritize halting the flow of illegal immigrants into the country or dealing with those already here.
At the same time, asked to rank the nation's most pressing problems, many more cited federal debt, unemployment, terrorism, health care and war ahead of illegal immigration.
Other polls have shown a majority of Americans, including a majority of Democrats, approve of Arizona's handling of its immigration problem. As the state is major gateway for illegal crossings, its officials have called for more help with border enforcement.
A defiant Brewer said her state's laws were aimed to complement and not supplant federal immigration policy, which she has called insufficient to the problem.
"Arizona is under attack in federal court from President Obama and his Department of Justice," Brewer said in a statement. "Today's filing is nothing more than a massive waste of taxpayer funds. These funds could be better used against the violent Mexican cartels than the people of Arizona."