The US President did not initially know that his personal lawyer had paid $130,000 to adult-film star Stormy Daniels but later learned about the payment, according to the White House.
Donald Trump told reporters last month that he did not know about the payment, made by his lawyer Michael Cohen.
But today, former New York City mayor Rudy Giuliani, who has joined Mr Trump's legal team, said the president knew about the payment and reimbursed Mr Cohen.
Ms Daniels, whose real name is Stephanie Clifford, has said she had a brief affair with President Trump in 2006.
He has denied the one-night stand.
Mr Giuliani said that Mr Trump repaid the $130,000 his lawyer gave to Ms Daniels to buy her silence.
In an interview on Fox News, Mr Giuliani, a former federal prosecutor and longtime friend of Mr Trump, said the president knew about the $130,000 payment and reimbursed Mr Cohen.
"They funnelled it through a law firm and the president repaid it," Mr Giuliani said.
"He didn't know about the specifics of it, as far as I know, but he did know about the general arrangement that Michael would take care of things like this."
He said the payment did not violate campaign finance laws because it was not drawn from Trump campaign funds.
When asked by reporters on 5 April if he knew about the payment to Mr Daniels, Mr Trump responded, "No."
Asked why Mr Cohen made the payment, Mr Trump said: "You'll have to ask Michael Cohen. Michael is my attorney. You'll have to ask Michael."
Mr Cohen has said he paid Ms Daniels out of his own pocket and was not reimbursed by Mr Trump.
The White House has denied Mr Trump had sex with Ms Daniels.
Ms Daniels has sued Mr Trump and Mr Cohen to be released from the non-disclosure agreement, saying it was invalid because Mr Trump never signed it.
She has also sued Mr Trump for defamation.