WASHINGTON—The Trump administration’s proposal to vastly expand offshore oil and gas drilling has been sidelined indefinitely as the Interior Department grapples with a recent court decision that blocks Arctic drilling, according to Interior Secretary David Bernhardt.

The ruling by a federal judge in Alaska last month may force Interior Department officials to wait until the case goes through potentially lengthy appeals before they can make a final decision on what offshore areas to open up for the oil and gas industry, Mr....