Illinois' attorney general is suing Chicago's Trump International Hotel & Tower for allegedly breaking environmental laws.
Lisa Madigan's suit claims the property draws and releases millions of gallons of water from the Chicago River without necessary permits.
Moreover, the property has not studied the effects of this on the river's fish population as required by law, it says.
A Trump Organisation spokesperson said the suit was political.
In an email reported by Reuters news agency, spokesperson Janet Isabelli said the organisation was "disappointed" Ms Madison filed the suit, "considering such items are generally handled at the administrative level".
"One can only conclude that this decision was motivated by politics."
Illinois Attorney General Lisa Madigan filed the lawsuit in Cook County Circuit Court on Tuesday.
She is a member of the Democratic Party and has been the state's attorney general since 2003.
Her suit alleges the hotel draws in nearly 20 million gallons (75m litres) of water a day for its air conditioning and ventilation system.
Such systems can trap animals when pulling in the water, the suit says, and federal law requires impact studies on the Chicago River's fish populations.
Allegedly Trump Tower did not submit results of a study to the authorities as required in 2013.
Moreover, the property's required licence to release heated water back into the river allegedly expired in August 2017.
"Trump Tower continues to take millions of gallons of water from the Chicago River every day without a permit and without any regard to how it may be impacting the river's ecosystem," Ms Madigan said in a statement.
"I filed my lawsuit to make sure Trump Tower cannot continue violating the law."
While Mr Trump's two sons have been running his businesses since he was elected to office, the president still retains all his shares in the Trump Organization.
He is currently embroiled in a lawsuit about his businesses, including the Trump International Hotel, which alleges ownership of the Trump business empire while president is a violation of the US constitution.
In June, a group of religious leaders and judges in Washington DC filed a complaint to the city's Alcoholic Beverage Control Board saying it should lose its liquor licence due to Mr Trump's "egregious conduct".
Local laws in the US capital say only people "of good character" can hold a liquor licence.