The ban passed Town Council by a vote of 5 to 4 after two years of consideration in April.
It would mean the use of hand-held and hands-free cell phones by drivers would be forbidden in Chapel Hill beginning June 1.
Cell phone use would be a secondary offense, meaning an officer must first stop a vehicle for another reason before issuing a citation for violating the ban. Violators would be fined $25.
North Carolina drivers already are prohibited from sending text messages while driving. Drivers under 18 are banned from any phone use.
The local ban is the first of its kind in the state.
The order signed by Judge Orlando Hudson blocks both the cell phone ban and a town towing ordinance.
In a news release Wednesday, the Stark Law Group said it filed suit on behalf of George's Towing & Recovery.
The company maintains its tow truck operators must use their mobile phones to respond to enquiries about cars that have been towed and need to be released.
The law firm also released a letter from the North Carolina Attorney General's office that says the Town of Chapel Hill does not have the authority to regulate the use of cell phones by motorists.
In his restraining order, Judge Hudson wrote the towing company's lawsuit "has a very strong likelihood of success."