It sets up a dramatic clash between Congress and the White House that could spill into the 2020 presidential campaign.
House Speaker Nancy Pelosi announced the inquiry on Tuesday after a closed-door meeting with Democratic lawmakers, saying Trump's actions appeared to have undermined national security and violated the US Constitution.
"The president must be held accountable. No one is above the law," said Pelosi, who had for months been reluctant to embrace an impeachment effort.
Trump tweeted the inquiry was "Witch Hunt garbage."
"Such an important day at the United Nations, so much work and so much success, and the Democrats purposely had to ruin and demean it with more breaking news Witch Hunt garbage," he tweeted. "Can you believe this?"
Pelosi's change of heart followed reports that Trump had pressured Ukrainian President Volodymyr Zelenskiy in a July 25 phone call to investigate Democratic presidential front-runner Joe Biden and his son.
Trump promised on Tuesday to release a transcript of his phone call. He also confirmed he had withheld nearly $US400 million ($NZ628 million) in US aid to Ukraine but denied he did so as leverage to get Zelenskiy to initiate an investigation that would damage Biden.
Pelosi said the six congressional committees currently investigating Trump would continue with their probes as part of the inquiry.
Biden on Tuesday called on Trump to fully comply with congressional investigations into the matter or risk impeachment.
"If he continues to obstruct Congress and flout the law, Donald Trump will leave Congress in my view with no choice but to initiate impeachment proceedings," Biden told reporters in Wilmington, in his home state of Delaware.
Trump, who has withstood repeated scandals since taking office in January 2017, said a "complete, fully declassified and unredacted" transcript of the July 25 call would be released on Wednesday.
The controversy came to light after a whistleblower from within the US intelligence community lodged a complaint with an internal watchdog about Trump's conversation with Zelenskiy.
House Intelligence Committee Chairman Adam Schiff said his panel was communicating with an attorney representing the whistleblower and that the individual would like to testify this week.
Trump said the transcript would show the call was "totally appropriate," that he had not pressured Zelenskiy to investigate Biden and that there had been no "quid pro quo" for US aid in exchange for a probe. Quid pro quo is a Latin phrase meaning a favour that is exchanged for a favour.
