Flynn, who was the National Security Adviser, said he had "inadvertently" briefed the Vice President Mike Pence with "incomplete information" about a phone call he had with the Russian ambassador.
Flynn had told Trump's team he did not discuss America's sanctions on Russia before he took office last year.
In December, Barack Obama ordered sanctions including expelling 35 Russian diplomats over evidence Moscow had attempted to influence the US election.
It is believed Flynn's call was wiretapped and the transcript shows he did discuss the sanctions.
The New York Times also claims that Flynn accepted money from Russia during a trip in 2015.
He was paid to attend a celebration of the TV network Russia Today and sat next to Vladimir Putin, it is claimed.
Democrat Congresswoman Nancy Pelosi has now spoken, saying: "This Administration has exhausted its excuses.
"Vladimir Putin’s grip on President Trump must be investigated, exposed and broken.
"National security demands that General Flynn be fired immediately."