White House hopeful accuses Hillary Clinton of also bearing blame for foundation of ISIL, which was formed in Iraq.
A moment later, on another topic, he emphasised the president's full legal name: Barack Hussein Obama.
"In many respects, you know, they honor President Obama," Trump said during a raucous campaign rally outside Fort Lauderdale, Florida. "He is the founder of ISIS."
He repeated the allegation three times.
"He's the founder of ISIS, okay?" he added. "He's the founder. He founded ISIS."
Trump has long blamed Obama and his former foreign minister Hillary Clinton for pursuing Middle East policies that created a power vacuum in Iraq that was exploited by ISIL.
He has sharply criticised Obama for announcing he would pull US troops out of Iraq, a decision that many Obama critics say created the kind of instability in which groups like ISIL thrive.
The White House declined to comment on Trump's accusation.
The former property mogul and reality TV star went on to criticise Clinton, his Democratic party rival for the presidency.
"And I would say, the co-founder would be crooked Hillary Clinton," he said.
Assassination allegationsISIL began as Iraq's local affiliate of al-Qaeda and has carried out massive attacks against Iraq's Shia Muslim majority, fueling tensions with al-Qaeda's central leadership.
The local group's then-leader, Jordanian-born Abu Musab al-Zarqawi, was killed in 2006 in a US air strike but is still seen as its founder.
Trump's accusation - and his pointed use of the president's middle name, Hussein - echoed previous instances where he has questioned Obama's loyalties.
In the past, Trump has also falsely suggested Obama is a Muslim or was born in Kenya, where Obama's father was from.
He also railed against the fact that the Orlando shooter's father, Seddique Mateen, was spotted in the crowd behind Clinton during a Monday rally in Florida, saying: "Of course he likes Hillary Clinton."
Trump has been criticised over the past week for comments he made suggesting gun rights advocates could stop Clinton from becoming president and picking new, anti-gun Supreme Court judges, by using their second amendment rights, which allow them to bear arms.
"Hillary wants to essentially abolish the Second Amendment," Trump told a rally in North Carolina.
"If she gets to pick her judges, nothing you can do folks," Trump said. "Although the Second Amendment people - maybe there is, I don't know."
Trump's campaign spokesman later denied allegations that the comments were advocating for Clinton to be assassinated.