Trump's initiative was aimed at ending the 29-day partial government shutdown, which has left many important departments relying on unpaid or highly reduced staff.
The president is trying to secure $5.7 billion in funding for the wall between the US and Mexico.
On the White House website, Trump called upon "every member of Congress" to pass a bill that would end the "crisis".
Democrats, who have a House majority since November's mid-term elections, have refused to the sign an overall budget if Trump maintains his demands for the wall. Instead they offered $1.8 billion to reinforce existing barriers, which Trump has.
In his new proposal, Trump said he was willing to compromise by offering a three-year "provisional status" to 700,000 young illegal immigrants brought into the US by their parents – the so-called "Dreamers".
The status would allow them to work, obtain social security numbers and give them protection from deportation.
Another 300,000 immigrants whose protected status is about to expire and who face imminent deportation, would also be granted a three-year "provisional status".
But Pelosi said in a statement before the speech that she would not support it, calling it a "non-starter" which was unlikely to pass the House.
"Unfortunately, initial reports make clear that his proposal is a compilation of several previously rejected initiatives, each of which is unacceptable and in total, do not represent a good faith effort to restore certainty to people's lives," Pelosi said.
"For one thing, this proposal does not include the permanent solution for the Dreamers and TPS recipients that our country needs and supports."
No end in sight
Pelosi's statement is the latest in an increasingly heated stalemate between her and the president.
On January 16, Pelosi wrote a letter to Trump, suggesting he postpone the State of the Union address set for 29 January, citing security concerns because crucial departments, such as the Secret Service and Homeland Security – necessary to guarantee a full session of both houses – were "hamstrung by furloughs" as a result of the continuing government shutdown.
Trump responded by postponing Pelosi's trip to Brussels, Egypt and Afghanistan, saying he would reschedule it when the shutdown is over.
With the latest Democratic refusal of Trump's proposal, the shutdown is set to continue.
What's in the wall?
Trump wants approval for his $5.7 billion wall project that would lead to "reopening the government" and "securing the border."
The proposal includes:
- $805 million for technology, canines, and personnel to help stop the flow of illegal drugs, weapons and other contraband.
- $800 million dollars in humanitarian assistance, medical support, and new temporary housing.
- $782 million to hire an additional 2,750 border agents, law enforcement officers, and staff.
- $563 million to support the immigration court system, including hiring 75 new immigration judge teams to reduce the immigration court backlog of 800,000 cases.