Trump had initially approved attacks on several Iranian targets, such as radar and missile batteries, Xinhua news agency quoted a New York Times report as saying on Thursday citing administration officials.
Trump, however, on Thursday night called off the operation that had been underway in its early stages, a senior administration official said.
"Planes were in the air and ships were in position, but no missiles had been fired when word came to stand down," the officials said.
The reason that Trump changed his mind at the last moment of the military strikes was unknown. The White House and the Pentagon declined to comment, the report said.
The US military confirmed on Thursday that a RQ-4A Global Hawk Unmanned Aircraft System (UAS) was shot down by an Iranian surface-to-air missile system on Wednesday night.
Iran, however, claimed the drone downed in the southern part of the country had crossed Iranian borders.
"Iran made a very bad mistake," Trump told reporters, adding that the shootdown of the drone was "a new wrinkle" that the US would not tolerate.
This incident further inflamed the ongoing tensions between the US and Iran which have been on the rise since Washington decided to withdraw from the Iran nuclear deal and resume "maximum" sanctions against Tehran.
Earlier incidents including several attacks on oil tankers in the region in the past few weeks also took a toll on the worsening ties.
( With inputs from IANS )