According to this article in the Tennessean, the Tennessee Department of Safety has unilaterally forbidden further issuance of the state's Certificate of Driving, a driving authorization document similar to a driver's license but available to anyone regardless of federal immigration status and not meant to be used as identification. The complete ban will be lifted March 6, but it will remain partially in effect by requiring future applications to prove legal immigration status.
The reason for the ban is a federal sting into state and private corruption related to the issuance of driving documents in Tennessee.
See the archives of the Hispanic Nashville Notebook for recent stories on this subject.
UPDATE: According to this Associated Press article printed in the Maryville (TN) Daily Times, Governor Bredesen says his plan is not to scrap enforcement of the current Certificate of Driving law.