The Republican president in February declared a national emergency at the border to secure the money that Congress refused to give him for the wall.
“The President’s action clearly violates the Appropriations Clause by stealing from appropriated funds, an action that was not authorized by constitutional or statutory authority,” Pelosi, the top Democrat in Congress, said in a statement.
She said a congressional legal advisory group voted to authorise the lawsuit.
In a stinging rebuke, the Democratic-controlled House passed legislation to terminate the emergency Trump declared at the US-Mexico border but Trump issued the first veto of his presidency in March to block that measure.
“The House will once again defend our Democracy and our Constitution, this time in the courts,” Pelosi said in a statement. “No one is above the law or the Constitution, not even the President.”
US Attorney General William Barr said the president’s emergency declaration was legal.
Meanwhile on Thursday, Trump backed away from his repeated threat to immediately close the southern US border with Mexico, but raised a new spectre of eventually slapping tariffs on car imports from Mexico unless it does to stop immigrants.
Trump prompted panic in the US business community last Friday by saying he would likely close the border this week to deal with a surge of migrants from Central America, but has since walked back the threat.
On Thursday, he told reporters at the White House he wants to see Mexico stop more migrants at its southern border. He gave the country a deadline to do more to stop drugs or face tariffs.
“We’re going to give them a one-year warning, and if the drugs don’t stop, or largely stop, we’re going to put tariffs on Mexico and products – in particular, cars. The whole ballgame is cars,” Trump told reporters.
Trump made immigration a centrepiece of his 2016 run for the White House, pledging to build a wall on the border to stop migrants.
Trump plans to visit the border at Calexico, California, on Friday.
“A lot of good things are happening with Mexico. Mexico understands that we’re going to close the border, or I’m going to tariff the cars,” he said.
Later on Thursday, a top Mexican trade official said that the trade agreement between Mexico, Canada and the US was firm on the car industry and not under threat.
Jesus Seade, the Mexican undersecretary for North America, would not comment on Trump’s remarks about possible tarriffs and said the trade agreement was separate from immigration issues.
Separately, Mexican exporters said this week they were looking into sending their goods to the United States by air freight to avoid a five-mile (eight-km)-long line of trucks at the border caused by the Trump administration moving federal agents away from customs checks to immigration duties.
Car parts and medical equipment makers were among the Mexican companies considering the more expensive air cargo to avoid incurring penalties for late delivery to US clients or factory closures, Luis Aguirre, the president of Mexico’s manufacturing industry chamber INDEX, said late on Wednesday.