Trump was addressing Democratic and Republican governors in the State Dining Room at the White House on Friday when he mentioned his recent executive order banning trans athletes from playing women's sports, prompting Mills to stand up and object.
"You better do it because you're not going to get federal funding," Trump told Mills.
The governor confronted Trump and said, "We're going to follow the law sir. We'll see you in court."
Trump shot back with, "Enjoy your life after governor because I don't think you'll be an elected official afterwards."
Trump frequently railed against transgender athletes on the campaign trail. His recently signed executive order has been praised by supporters saying it will restore fairness but critics say the directive infringes on the rights of a tiny minority of athletes.
Trump is relying on the Education Department to achieve the directive's goal through a revised interpretation of federal civil rights laws. Schools that do not follow these laws can lose federal funding.
Friday's exchange was not the first time Trump attacked Maine over the issue. He threatened to withhold federal money from the state if it did not comply with his order during separate remarks at a Republican Governors Association meeting on Thursday.
Mills responded to the White House exchange in a statement on Friday saying her state "will not be intimidated by the President's threats."
"If the President attempts to unilaterally deprive Maine school children of the benefit of Federal funding, my Administration and the Attorney General will take all appropriate and necessary legal action to restore that funding and the academic opportunity it provides," the statement said.
More than two dozen states already bar transgender athletes from participating in school sports, whether in K-12 schools or at the collegiate level.
In January, days before Trump's inauguration, the House passed a bill to bar transgender women and girls from sports programs for female students nationwide. The bill faces uncertain prospects in the Senate.
