Announcement comes shortly after UN members voted overwhelmingly to oppose Trump's Jerusalem decision.
The U.S. will reduce its funding of the UN by $285 million for the coming fiscal year, its envoy to the UN announced late Sunday.
“The inefficiency and overspending of the United Nations are well known. We will no longer let the generosity of the American people be taken advantage of or remain unchecked," Nikki Haley said in a statement.
"This historic reduction in spending – in addition to many other moves toward a more efficient and accountable UN – is a big step in the right direction," she added.
The announcement came shortly after UN member nations voted overwhelmingly to oppose a decision by President Donald Trump to recognize Jerusalem as the capital of Israel – a move that drew condemnation and protests from across the Arab and Muslim world.
The full 193-member UN General Assembly met last week for a rare emergency special session regarding Trump's decision. Unlike at the Security Council, the U.S. has no veto power in the assembly.
A total of 128 members voted in favor of the resolution while nine countries voted against it and 35 others abstained. Twenty-one countries did not cast a vote.
In response, Trump threatened UN members that he would withhold billions of dollars in aid to countries that voted in support of the resolution denouncing the U.S. move.
"They take hundreds of millions of dollars and even billions of dollars, and then they vote against us. Well, we’re watching those votes. Let them vote against us. We’ll save a lot. We don’t care," he said.
Haley also threatened UN members over the vote, saying there would be consequences and she would be “taking names” of countries who voted in favor of the resolution.
Jerusalem's status has long been considered a final status issue to be determined by Israeli-Palestinian peace negotiations, and Trump's decision is widely seen as undercutting that longstanding understanding. East Jerusalem, which Palestinians are seeking to make the capital of their state, has been under Israeli occupation since 1967.
The U.S. currently provides about 22 percent of the UN budget or approximately $3.3 billion per year.