Trump’s attorney, Michael Cohen, is said to have made the pay off just one month before the November 2016 presidential vote.
Mr Cohen said that he was not reimbursed for the payment to the actress, whose real name is Stephanie Clifford and who goes by the stage name of Stormy Daniels, and that the payment was legal.
The lawyer said: “Neither the Trump Organisation nor the Trump campaign was a party to the transaction with Ms. Clifford, and neither reimbursed me for the payment, either directly or indirectly.
“The payment to Ms. Clifford was lawful, and was not a campaign contribution or a campaign expenditure by anyone.”
Mr Cohen reportedly declined to comment on whether the US President was aware of the payment being made.
The alleged affair occurred in 2006 when he was already married to his current wife Melania and his son Bannon was just four months old.
Both Trump and Ms Clifford have denied the sexual encounter took place.
The President’s lawyer added: ““I am Mr Trump’s longtime special counsel and I have proudly served in that role for more than a decade.
“In a private transaction in 2016, I used my own personal funds to facilitate a payment of $130,000 to Ms. Stephanie Clifford.”
Explaining why he made the transaction if the allegations were false he said: “Just because something isn’t true doesn’t mean that it can’t cause you harm or damage.
“I will always protect Mr Trump.”
Following the revelations watchdog group called Common Cause have filed a complaint, arguing that the payment was a part of donations or expenditure in Trump’s presidential campaign and should have been publicly disclosed.
Responding to the official grievance Mr Cohen said: “The complaint alleges that I somehow violated campaign finance laws by facilitating an excess, in-kind contribution.
“The allegations in the complaint are factually unsupported and without legal merit, and my counsel has submitted a response.”
The US President has refused to speak publicly about the affair allegations.