The rule was slated to take effect in 60 days.
The settlement has for 22 years governed the treatment of migrant children in US custody, requiring government agencies to follow a detailed set of standards while caring for children apprehended by immigration and border agents.
In fact, a federal judge in 2015 rebuffed an attempt by the administration of Barack Obama to indefinitely detain migrants under certain circumstances in the wake of a surge of arrivals at the border.
With the final version announced Wednesday, administration officials said it would replace the standards outlined in the agreement with specific requirements for detention centers set by Immigration and Customs Enforcement. In particular, any change to the Flores Agreement has to be approved by the judge who now oversees the settlement.
The American Academy of Pediatrics has repeatedly said that detention is not suitable for children, who may suffer numerous negative physical and emotional symptoms.
Although there was a massive dip in illegal border crossing during Trump's first year in the White House, the frequency spiked in late 2018, and border agents and officials lamented they were not prepared for the influx, leading to overcrowding and unsanitary conditions at many detention facilities.
The new rule will change the terms of the agreement, resulting in its termination, and will change the way USA agencies care for alien children, both those who arrive with family members and those who arrive unaccompanied.
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Moments after McAleenan made his announcement, Madhuri Grewal, a policy counsel with the American Civil Liberties Union, called the new policy "yet another cruel attack on children, who the Trump administration has targeted again and again with its anti-immigrant policies".
The government now has only between 2,500 and 3,000 detention beds for family units and said any expansion of detention facilities will meet a high standard of care in "campus-like" settings.
In recent months, the administration has proposed rules that could make it more hard for immigrants to get green cards, worked to end temporary protected status for migrants from certain countries and limit avenues to declare asylum.
The settlement had placed limits on how long children could be held in detention, leading the administration to release tens of thousands of families pending the resolution of their cases.
Trump has struggled to respond to an unprecedented influx of undocumented migrants at the U.S. -Mexico border, mostly people from Guatemala, El Salvador and Honduras.
Republicans have argued that too many, once released into the community, fail to show for their hearings months or years into the future, or find ways to stay in the country even after an adverse ruling.
Trump tweeted a quote on Wednesday from National Border Patrol Council President Brandon Judd, where he claims the rules would end "catch and release" immigration practices.