David Miliband, who is a former British foreign secretary and member of parliament, said while the journalist's death was tragic, worldwide focus on Khashoggi's murder should be switched to actions of Saudi Arabia in Yemen, where millions of lives are affected.
However, a halt to refuelling could have little practical effect on the conflict, seen as a proxy war between Saudi Arabia and Iran.
"We support the decision by the Kingdom of Saudi Arabia, after consultations with the U.S. Government, to use the Coalition's own military capabilities to conduct in-flight refueling in support of its operations in Yemen", the statement, published on the department's website, read.
Mattis acknowledged "continued bipartisan interest from Congress", and said the Trump administration is "appreciative of the continued dialogue we have had with key members on this issue".
"We support the decision by the kingdom of Saudi Arabia", he said.
Critics of the Saudi campaign - including Democrats who won control of the House of Representatives in elections on Tuesday - have long questioned USA involvement in the war, which has killed more than 10,000 people, displaced more than 2 million and led to widespread starvation in Yemen since it began in 2015.
"This is a major change".
The conflict has plunged Yemen into a humanitarian crisis.
The coalition has come under heavy criticism for its relentless airstrikes since 2015, which United Nations experts say have caused the majority of the estimated 10,000 civilian deaths in the conflict and could constitute a war crime.
Previously the USA has been refuelling around 20 percent of the coalition's aircraft.
Senator Bernie Sanders also welcomed the decision, saying he would press for the passage of a resolution that would call on Trump to withdraw from the war in Yemen.
Earlier this year, Mr Mattis had defended USA military support to Saudi-led coalition forces in Yemen, when politicians considered forcing the Pentagon to end Washington's involvement. "United States participation in this conflict is unauthorized and unconstitutional and must end completely", he said in a statement.
Saudi Arabia has been paying the US for the refueling, but there were no details on how much that cost.
"We continue to have discussions with the Saudis. Why are we still selling them the bombs at a discount?" he asked. "We need to be doing this in the next 30 days".
Several US officials said the end to refueling would not stop American training and military assistance for the Saudi aggression against Yemen.
As a result, the decision to halt the US refueling will likely have little impact on the fight, but will allow the Trump administration to say it has taken action against the Saudis for the devastation in Yemen.
The brutal war was launched in March 2015 in an attempt to reinstall Yemen's former Riyadh-allied regime and crush the Houthi Ansarullah movement, which has been running state affairs in the absence of an effective government.
The Saudi-led blockade of the port city of Hodeidah threatens to make things worse, as it is the entry point for most of the country's food aid and medical supplies. The conflict has resulted in a huge civilian death toll, leading to an acute humanitarian disaster and outbreaks of cholera across the country.