Without naming Mr Trump, Mr Ali said that Muslims “have to stand up to those who use Islam to advance their own personal agenda”.
The three-time world heavyweight champion, 73, is a cultural icon and one of the world’s most famous Muslims.
Mr Trump says he will never leave the race, despite widespread criticism.
The White House had said that his comments “disqualified” him from running for the presidency.
Mr Ali’s statement was directed at “presidential candidates proposing to ban Muslim immigration to the United States”.
“They have alienated many from learning about Islam,” he said.
The former heavyweight champion also strongly criticised violence committed by jihadists from the Islamic State (IS) group.
“True Muslims know that the ruthless violence of so called Islamic Jihadists goes against the very tenets of our religion,” he said.
“These misguided murderers have perverted people’s views on what Islam really is.”