Mr Trump blamed “irrational hostility” for the decision to no longer hold the influential summit between the world’s economic powerhouses in 2020 at the Trump National Doral Miami.
Mr Trump tweeted: “Based on both media & Democrat crazed and irrational hostility, we will no longer consider Trump National Doral, Miami, as the host site for the G7 in 2020.”
He said his administration “will begin the search for another site, including the possibility of Camp David, immediately”.
The reversal raises doubts about the position of Mr Mulvaney who told a press conference that his staff had concluded it was “far and away the best physical facility”.
He said Camp David, the presidential retreat, had been discounted as some people thought it was a “miserable” place, adding that it was too small and remote for the summit.
In August, Mr Trump was the first administration official to publicly float the selection of his property to host the summit when he praised its facilities and proximity to Miami’s main airport.
His comments drew instant criticism from good governance groups and Democrats, who said it raised concerns that Mr Trump was using the White House to boost his personal finances
The criticism did not die down, even as the president insisted he would host the summit at cost, though he refused to disclose financial details.
Noah Bookbinder, executive director of Citizens for Responsibility and Ethics in Washington, called the reversal ”a bow to reality”.
But he added it “does not change how astonishing it was that a president ever thought this was appropriate, or that it was something he could get away with”.
An hour before Mr Trump’s announcement, Democratic presidential candidate Joe Biden condemned the selection of Doral for the summit.
The former vice president said: “Hosting the G7 at Trump’s hotel? A president should never be able to use the office for personal gain.”
Additional reporting by Associated Press