It was removed under George W. Bush's presidency as part of a diplomatic deal for North Korea to allow inspection of its Yongbyon nuclear facility, as well as dismantle a plutonium plant-neither of which were done.
The U.S. State Department now lists Sudan, Syria and Iran as nations that have "repeatedly provided support for acts of worldwide terrorism".
Trump's announcement comes days after his return from a five-nation tour of Asia, which focused on curbing Pyongyang's nuclear ambitions. Trump has constantly tweeted about North Korea's threat to the USA because the nation continues to pursue nuclear weapons and test ballistic missiles.
While North Korea is widely regarded as one of the most oppressive governments in the world with respect to its own people, its involvement with global terrorism is less prominent.
"This designation will impose further sanctions and penalties on North Korea and related persons, and supports our maximum pressure campaign to isolate the murderous regime that you've all been reading about and, in some cases, writing about", the president said.
"Should have happened years ago", Trump declared, announcing the designation at the start of a White House cabinet meeting.
Last month, 16 members of the U.S. House of Representatives had sent a letter to the State Department calling for North Korea's re-designation on the terror list.More news: Argentina misses Messi in friendly loss to Nigeria
More news: Floor collapses at apartment party in Denton; only minor injuries reported
More news: Lions rally past Browns for 17-10 halftime advantage
Relations between the US and North Korea have been fraught ever since President Trump took office.
"The Treasury Department will be announcing an additional sanction - and a large one - on North Korea", he said. Taken together, the four main categories of sanctions resulting from designation under these authorities include restrictions on US foreign assistance; a ban on defense exports and sales; certain controls over exports of dual use items; and miscellaneous financial and other restrictions.
The North Korean newspaper then warned Mr Trump not to meddle in North Korean affairs following the recent escalation in tensions between Washington and Pyongyang.
"Over the past year alone, Kim Jong Un and his regime brazenly assassinated his brother with a chemical weapon and brutally tortured Otto Warmbier, leading directly to his tragic death", the California Republican said in a statement.
Under sanctions legislation signed by Trump in August, the State Department was required to report to Congress earlier this month whether it will re-designate North Korea.
A US intelligence official who follows developments in North Korea expressed concern that the move could backfire, especially given that the basis for the designation is arguable.
North Korea was put on the US terrorism sponsor list for the 1987 bombing of a Korean Air flight that killed all 115 people aboard.