The city and state of Illinois are suing the Trump administration over the National Guard deployment.
The suit claims the administration did not give a lawful explanation, as to why the Guard is needed in the Chicago area.
During a hearing Wednesday, DOJ lawyers asked the judge to pause the court proceeding, so terms of a settlement can be negotiated.
The judge ordered both sides to appear in court again at the end of the month.
On Monday, Chicago and the state of Illinois filed a separate lawsuit in an effort to limit immigration agents' authority in the state.