The state department says the agency supports or participates in a programme of coercive abortion or involuntary sterilisation in China.
But the UNFPA says this is an "erroneous claim", and that its work does not break any US laws.
In total $32.5m (£26m) in funds will be withdrawn for the 2017 financial year.
This is the first of the promised cuts to US financial contributions to the UN by the Trump administration.
The UNFPA, like other UN agencies, is funded by governments voluntarily.