The New York attorney general won a major victory in her civil case against Donald J. Trump on Tuesday when a New York judge determined that the former president fraudulently inflated the value of his assets to obtain favorable loans and insurance deals.

The decision by Justice Arthur F. Engoron precedes a trial that is scheduled to begin Monday, and will considerably smooth Attorney General Letitia James’s path forward as she seeks a penalty of about $250 million.

Justice Engoron’s decision narrows the issues that will be heard, effectively deciding that the trial was not necessary to find that Mr. Trump was liable and that the core of Ms. James’s case was valid. It represents a major blow to Mr. Trump, whose lawyers had sought to persuade the judge to throw out many of the claims against the former president.

In his order, Justice Engoron wrote scathingly about Mr. Trump’s defenses, saying that the former president and the other defendants, including his two adult sons and his company, ignored reality when it suited their business needs. “In defendants’ world,” he wrote, “rent-regulated apartments are worth the same as unregulated apartments; restricted land is worth the same as unrestricted land; restrictions can evaporate into thin air.”

“That is a fantasy world, not the real world,” he added.

The judge also levied sanctions on Mr. Trump’s lawyers for making arguments that he previously rejected. He ordered each to pay $7,500, noting that he had previously warned them that the arguments in question bordered on being frivolous.

Repeating them was “indefensible,” Justice Engoron wrote.

Mr. Trump still has an opportunity to delay the trial, or even gut the case against him. Mr. Trump has already sued Justice Engoron, and an appeals court is expected to rule this week on his lawsuit. But if the appeals court rules against him, Mr. Trump will have to fight the remainder of the case at trial.

Ms. James started investigating Mr. Trump in March 2019 and filed a lawsuit against him last September, accusing him of “staggering” fraud in representing the value of his apartment buildings, hotels and golf clubs, among other assets. Her filings have accused Mr. Trump of using simple, duplicitous tricks to multiply the value of his signature properties, from Trump Tower to Mar-a-Lago.

Mr. Trump knowingly overvalued his assets by as much as $2.2 billion in some years, Ms. James has argued.

Her lawsuit seeks a fine of roughly $250 million and to sever the Trump family from leading the Trump Organization.

Mr. Trump’s lawyers had asked Justice Engoron for a so-called summary judgment — a ruling that they are entitled to a victory before trial based on undisputed facts — seeking to toss out many claims against him. They relied heavily on an appeals court ruling from June that raised the notion that some claims against Mr. Trump might be too old to proceed to trial.

Justice Engoron denied Mr. Trump’s request, while granting Ms. James’s similar bid for partial summary judgment.

Mr. Trump has denied all wrongdoing and has accused Ms. James, a Democrat, of political persecution. His lawyers have noted that the banks that lent Mr. Trump money were hardly victims — they turned a profit.