The Deferred Action for Childhood Arrivals program, or DACA, will be phased out over six months, giving Congress a chance to decide the fate of those affected.
Attorney-General Jeff Sessions says the Trump administration wants Congress to find another way to protect immigrants brought into the country illegally as children.
A majority of Mr Trump's Republican Party politicians, including House speaker Paul Ryan and Arizona senator John McCain, reportedly did not want him to drop DACA.
But White House spokeswoman Sarah Huckabee Sanders has told reporters the President's decision brings the United States closer to a better immigration system.
"He has ended this unsustainable and unconstitutional program imposed by the previous administration. The President is calling on the men and women in Congress to fulfil their duty to the American people by truly reforming our immigration system for the good of all people. This is something that needs to be fixed legislatively, and we have confidence that they're going to do that. And we stand ready and willing to work with them in order to accomplish responsible immigration reform."
The program has granted about 800,000 immigrants a reprieve from deportation since the Obama administration set it up in 2012.
The former president made a point at the time of saying the program would not be an indefinite solution for those wanting to live in the United States.
"Let's be clear, this is not amnesty, this is not immunity. This is not a path to citizenship. It's not a permanent fix. This is a temporary stopgap measure that lets us focus our resources wisely while giving a degree of relief and hope to talented, driven, patriotic young people. It is the right thing to do."
Mr Obama has taken to Facebook following Mr Trump's move, calling on Congress and him to fix the situation with moral urgency.
Republican senator Lindsey Graham says the decision to cut the DACA program represents a landmark opportunity for the party.
"From a Republican Party point of view, this is a defining moment. We need to create a step, a process forward, to fix a broken immigration system. To the President: You have a chance to show the nation, as the president of all of us, where your heart's at, and you have a chance as the leader of the Republican Party to do two things -- say that we are the party of a constitutional process, that we believe in doing it right, but right means taking care of these kids."
Right on cue, Mr Trump has gone public with exactly those sentiments.
"I have a great heart for the folks we're talking about, a great love for them. And people think in terms of children, but they're really young adults. I have a love for these people, and, hopefully, now Congress will be able to help them and do it properly. And I can tell you, in speaking to members of Congress, they want to be able to do something and do it right. And, really, we have no choice. We have to be able to do something, and I think it's going to work out very well. And, long term, it's going to be the right solution."
But those affected by the program, often referred to as Dreamers and typically ranging in age from 15 to 36, are protesting against the move.
School students in Colorado walked out of school, while police in New York handcuffed and removed over a dozen activists from a crowd of 400 outside Trump Tower.
Protests also broke out in Los Angeles, Miami, Philadelphia and, in Washington, at the White House.
There, Josue De Luna, illegally brought from Mexico in 2002 at age nine, told reporters the current US political climate fosters an attitude viewing people like him as not human.
"I don't think it's just DACA. It's just this whole political climate that is constantly, every single day of our lives, dehumanising us, from the moment that we wake up and we turn on the TV and (it) reminds us that we're not accepted here and that they ... they don't see us as human beings. I think that's the reason why they do this to us, because they don't see us as human beings."
For now, new DACA applications will no longer be accepted, and those in the program will see their legal status, and work and study permits, begin expiring in March 2018.
That is unless Congress passes legislation allowing a new channel for temporary or permanent legal-immigration status.
