Obama went on tirade against the billionaire businessman on live television. It is seen as an important development as it is the first time that a president has publicly castigated someone who could succeed him at the White House.
Obama's remarks were deeply motivated by his disgust over Trump's response to the worst terror attack since 9/11.
The real estate mogul on Monday started the fight by hinting that in some way the President was complicit or approved of Islamic terror attacks, saying: "There is something going on."
Obama responded saying that Trump's views are so extreme that he threatens the fabric of America itself.
"That's not the America we want," he said. "It doesn't reflect our democratic ideals. It will make us less safe."
The president then went on to draw an implicit analogy between Trump's call for a ban on Muslim travel and the most "shameful" moments in American history when the people were mistreated by the government.
"If we ever abandon those values, we would not only make it a lot easier to radicalize people here and around the world, but we would have betrayed the very things we are trying to protect," Obama warned.
For his part, Trump responded to the President during a rally in Greensboro, North Carolina, saying Obama "was more angry at me than he was at the shooter."
"The level of anger, that's the kind of anger that he should have for the shooter and these killers that shouldn't be here," Trump added, blasting Obama as a "lousy president" who had done a "terrible job."