The U.S. Department of Justice filed a lawsuit on Thursday to block the Oracle Corporation's bid to take over PeopleSoft Inc., arguing that the deal would be anticompetitive and result in higher costs for businesses, colleges, and other users of the companies' software.

The attorneys general of Hawaii, Maryland, Massachusetts, Minnesota, New York, North Dakota, and Texas joined the department's suit, which seeks to put an end to Oracle's $9.4-billion takeover attempt. The suit was filed in the U.S. District Court in San Francisco.

Many PeopleSoft customers in academe welcomed the department's move.

Ola Faucher, director of human resources at the University of Kansas, is president of the Higher Education User Group, an independent organization representing about 345 higher-education institutions that use PeopleSoft products. She said she was relieved by the Justice Department's announcement and hoped for a swift conclusion.

"We hope that this will put an end to the whole struggle," Ms. Faucher said. "At least it will be a disincentive for Oracle to continue."

Members of the user group have opposed Oracle's takeover bid from the start. Ms. Faucher said they were concerned that Oracle would eventually make PeopleSoft customers switch to Oracle software, despite assurances from Oracle to the contrary.

Ms. Faucher said she had been interviewed by investigators from the Department of Justice about the takeover attempt, but she declined to reveal what she had said, saying that it was a confidential interview.

R. Hewitt Pate, assistant attorney general in charge of the department's antitrust division, said that after an extensive review, the department had concluded that allowing the deal to go forward would hurt the software market.

"The customers were concerned that this merger is going to eliminate competition," Mr. Pate said. "Colleges and universities could be among the customers affected in this case."

The department noted that Oracle, PeopleSoft, and a German company called SAP are the only businesses in the market that sell high-function software for human-resources management and financial management to large businesses, colleges, government agencies, and other organizations. Customers of the three software companies benefit from their head-to-head competition, the Justice Department found, because it results in aggressive discounts and innovative products.

Jim Finn, a spokesman for Oracle, said in a written statement that the Justice Department had bowed to PeopleSoft's demands instead of making the right decision.

"The Department of Justice decision follows an aggressive lobbying campaign by PeopleSoft management," Mr. Finn said. "It is inconsistent with the overwhelming evidence of intense competition in the markets we serve, and we believe it is without basis in fact or in law. A combined Oracle/PeopleSoft will significantly benefit all customers and shareholders involved."

Craig Conway, president and chief executive officer of PeopleSoft, said Oracle needed to give up its takeover bid.

"Now that the antitrust day of reckoning has arrived and the Justice Department has announced its decision to sue to block the transaction, it is time for Oracle to abandon its efforts to acquire the company," Mr. Conway said in a written statement. "Both companies should now devote all of their energy to competing in the marketplace to provide better products and services for customers. That's the PeopleSoft way of creating greater value for our stockholders."

More than 700 colleges and universities use PeopleSoft's software products.

Oracle is offering to pay PeopleSoft shareholders $26 per share, significantly higher than Thursday's closing price of $21.78 per share -- down 35 cents for the day. Oracle closed at $13.28 per share -- up 9 cents.