Some states are threatening to take away funding from cities that offer help to illegal immigrants and don't cooperate with federal immigration control officials.
Sanctuary cities, as they are known, have lax immigration law enforcement policies, allowing illegals to receive government services without verifying their legal status. Supporters contend these policies ensure illegal immigrants will seek police protection and proper health care.
Detroit, which became a sanctuary city in May, could stand to lose $300 million a year, but local law prevents police from specifically searching for or reporting illegal immigrants.
"Sanctuary cities are dangerous, they're illegal and they're counterproductive to combating illegal immigration," said Bob Dane, a spokesman for Federation for American Immigration Reform.
There are 32 sanctuary cities and counties in the United States.
City leaders in Detroit say while police can assist in specific federal cases, helping nab illegal immigrants among the city's large Latino and Arab populations has drawn racial-profiling accusations.
"When they are carrying out the good faith performance of their duties, they cannot ask any citizen for a passport or any documentation verifying their immigration status," said Ken Cockrell, Detroit City Council president.
But some state lawmakers want to put the squeeze on Detroit.
"I do want to give police the power to be able to do their jobs, and their job is to keep the public safe," said state Rep. Kim Meltzer.
Meltzer proposed a state law that would strip state aid from Michigan's sanctuary cities.
"If it takes federal financial withholding of dollars in order for politicians and city councils like those in Detroit to reverse these policies, then so be it," Dane said.
Meanwhile, a House-passed plan to take federal money away from police agencies if they don't help federal agents was killed in the Senate in October.
FOX News' Steve Brown contributed to this report.