The US president castigated Kathy Griffin saying she "should be ashamed of herself" for the grisly-looking photograph. "My children, especially my 11 year old son, Barron, are having a hard time with this. Sick!" he tweeted.
Griffin, 56, who had co-hosted CNN's annual New Year's Eve coverage for the last decade, apologized on Tuesday and said she had asked the celebrity photographer Tyler Shields to remove the picture from the internet.
"CNN has terminated our agreement with Kathy Griffin to appear on our New Year's Eve program," its communications division announced on Twitter.
The network had said earlier it was "evaluating" its New Year's Eve coverage and called the picture "disgusting and offensive."
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First Lady Melania Trump also criticized the outspoken Trump critic, who has twice won Emmys for her reality show "My Life on the D List."
"As a mother, a wife, and a human being, that photo is very disturbing," the president's wife said in a rare statement.
In a 31-second video posted to social media late Tuesday Griffin said: "I beg for your forgiveness. I went too far. I made a mistake and I was wrong."
Trump's eldest son Donald Jr, who runs the family business in New York, and Mitt Romney, the defeated 2012 Republican presidential nominee, were among those conservatives who slammed the photograph.
"Our politics have become too base, too low & too vulgar, but Kathy Griffin's post descends into an even more repugnant & vile territory," Romney tweeted.
"It is never funny to joke about killing a president," tweeted Chelsea Clinton, the daughter of Trump's former election rival Hillary.
"I think she was thinking she was making some artistic statement, but that image has no place in our political dialogue," Al Franken, Democratic Senator from Minnesota and a former comedian on long-running television show Saturday Night Live, told MSNBC.
The Secret Service said it would look into the incident, posting on Twitter that threats against protectees "receive the highest priority of all of our investigations."
Squatty Potty, a Utah-based bathroom products company, suspended an advertising campaign featuring Griffin, calling the picture "deeply inappropriate.