The order also will offer assistance to religious groups that have faced fines for defying an Obamacare mandate to provide contraceptives to their employees.
He vowed to defend all faiths, saying the order showed the United States "will never stand for religious discrimination".
"Because President Trump has so far failed to fulfill his repeated campaign promises, people of faith must now turn their attention to the (Department of Justice) to receive the protections President Trump has long promised them", group president Brian Brown said.
The order will declare that it is the policy of the Trump administration "to protect and vigorously promote religious liberty", according to a senior administration official. "I think they oughta have a voice but I'm just totally against getting the political arena in the church arena", said Cooper.
Rolling back the Johnson Amendment does not favor any particular religious views over others, and the president has broad authority to decide not to enforce certain laws, said Robin Fretwell Wilson, a professor at the University of Illinois College of Law.
The executive order was important for Trump as it would help allay his conservative supporters who were disillusioned after he avoided strong actions against issues like abortion during his time in office.
In addition to doing away with the rule that says religious organizations and other nonprofits that endorse political candidates risk losing their tax-exempt status, the executive order also allows religious organizations to opt out of providing birth control under the Affordable Care Act.
The intent of the president's order is to weaken enforcement of the so-called Johnson Amendment, a 1954 law that restricts all tax-exempt institutions from campaigning for - or against - political candidates.
Trump said he was signing the controversial order "to prevent the Johnson Amendment from interfering with their First Amendment Rights".
Both praise and criticism following the President's new executive order that could allow religious groups to become more politically active.
Still, Trump has long promised conservative Christians who supported his White House bid that he would block the regulation.
But the order is controversial on both ends of the political spectrum.
The lesbian, gay, bisexual and transgender activist group Equality Florida had scheduled a conference call with reporters Thursday to discuss the order but opted to call it off once their attorneys read the contents of it.
"Though we appreciate the spirit of today's gesture, vague instructions to federal agencies simply leaves them wiggle room to ignore that gesture, regardless of the spirit in which it was intended", Farris said in a statement.