Nato Secretary-General Jens Stoltenberg defended Trump, saying that although he was "blunt" he had "a very plain and clear message on the expectations" of allies.
But one senior diplomat said Trump, who left the leaders' dinner before it ended to fly to Italy for a G7 summit, said the remarks did not go down well at all.
"This was not the right place or time," the diplomat said of the very public harangue. "We are left with nothing else but trying to put a brave face on it."
In another unexpected twist, Trump called on Nato, an organisation founded on collective defence against the Soviet threat, to include limiting immigration in its tasks.
And Trump did say that the US "will never forsake the friends who stood by our side" but Nato leaders had hoped he would more explicitly support the mutual defence rules of a military alliance he called "obsolete" during his campaign.
Instead, he returned to a grievance about Europe's drop in defence spending since the end of the Cold War and failed to publicly commit to Nato's founding Article V rule which stipulates that an attack on one ally is an attack against all.
"Twenty-three of the 28 member nations are still not paying what they should be paying for their defence," Trump said, standing by a piece of the wreckage of the Twin Towers.
"This is not fair to the people and taxpayers of the United States, and many of these nations owe massive amounts of money from past years," Trump said as the other leaders watched.
Nicholas Burns, a former longtime diplomat and ambassador to Nato from 2001-2005, now a professor at Harvard's Kennedy School of Government, said every US president since Harry Truman had pledged support for Article V and that the US would defend Europe.
White House spokesman Sean Spicer said Trump was "100 per cent" committed to collective defence. "We are not playing cutesie with this. He is fully committed," Spicer said.
Praise was always going to be in short supply after Trump's sharp election campaign criticism of the alliance, which he blamed for not doing more to combat terrorism.
Last year, Trump threatened to abandon US allies in Europe if they did not spend enough on defence, comments that were particularly unnerving for the ex-Soviet Baltic states on Russia's border which fear Moscow might try a repeat of its 2014 annexation of Ukraine's Crimea.
- Reuters