The regulation would largely affect migrants from Central America's Northern Triangle - Guatemala, Honduras and El Salvador - who cross the U.S. border with Mexico to flee violence, including political persecution, and poverty in their home countries.
Administration officials have said existing US asylum rules encourage illegal immigration and bog down legitimate claims.
The American Civil Liberties Union said that right of asylum must be granted to anyone entering the country, regardless of where they were.
The rule 'would bar such aliens from eligibility for asylum and thereby channel inadmissible aliens to ports of entry, where they would be processed in a controlled, orderly, and lawful manner'.
In nearly 50 percent of cases where Central American migrants passed their initial asylum-seeking screening, the migrant never appeared for their asylum hearing or did not even file an asylum application.
But according to the new rule, Trump has authority to restrict illegal immigration "if he determines it to be in the national interest". I was on a call with a senior administration official today.More news: Tesla picks Robyn Denholm to replace Musk as chairperson
In 2018, border patrols have registered more than 400,000 illegal border crossers, homeland security said.
Trump is expected to sign the order on Friday before leaving on a trip to Paris. Generally, only about 20 per cent of applicants are approved.
Trump's administration argues that he has the executive power to curb immigration in the name of national security, a power he invoked right after taking office with a controversial ban on travelers from several mostly-Muslim countries - whose final version was upheld by the US Supreme Court on June 26 after a protracted legal battle. Those issues were not addressed by the regulations Thursday. They said that the asylum - well, this is something that we know.
Officials have turned away asylum seekers at border crossings because of overcrowding, telling them to return later.
POTUS initially revealed his administration's intentions last week during a speech at the White House in which he indicated that he was "finalizing a plan" to deny asylum claims from those who illegally enter the US. About 4,800 migrants are sheltered in a sports complex in Mexico City, some 600 miles (965 kilometres) from the USA border.
Similar caravans have gathered regularly over the years and have generally dwindled by the time they reach the southern border.