Climate United Fund alleges that in freezing the grant money, approved by Joe Biden's administration, the "EPA has acted to prevent Citibank from dispersing funds, harming Climate United, its borrowers, and the communities they serve."
It is the latest in a scores of cases filed by nonprofit groups, state attorneys general and others fighting moves by President Donald Trump to roll back Biden's policies as he seeks to shrink the federal bureaucracy and spending and broadly reshape US immigration, foreign and social policies.
Judges have stalled Trump's efforts in a number of cases, but he has had some legal victories.
Spokespeople for Washington-based Climate United, Citibank and the EPA did not immediately respond to requests for comment on the suit, filed in federal court in the capital on Saturday.
Climate United says in its court filing that it was selected for the EPA's National Clean Investment Fund program last April and planned to lend to developers nationwide to support solar power, electric trucks and energy efficient housing.
"This program was designed to save money for hard-working Americans who are struggling to pay for groceries and keep the lights on," the group said in a statement.
"We're going to court for the communities we serve - not because we want to, but because we have to."
Climate United alleges it is owed about $US7 billion ($A11 billion), part of $US20 billion ($A32 billion) that has been swept up in a controversy with EPA Administrator Lee Zeldin, who said the funding approval by the "self-dealing" Biden administration amounted to "intentionally tossing 'gold bars off the Titanic'" before he left office.
Last month, Trump administration officials instructed federal prosecutor Denise Cheung to start a criminal probe of the funding. She resigned rather than complying, saying she believed the request was not supported by evidence.
