Justice Arthur Engoron of the New York state court in Manhattan on Thursday ruled in favour of Attorney-General Letitia James in directing Trump, his son Donald Trump Jr and his daughter Ivanka Trump to testify.
Engoron said James had "the clear right" to issue her subpoenas and question the Trumps after having uncovered "copious evidence of possible financial fraud".
Failing to issue subpoenas "would have been a blatant dereliction of duty", Engoron wrote.
"Today, justice prevailed," James said in a statement. "No one will be permitted to stand in the way of the pursuit of justice, no matter how powerful they are. No one is above the law."
The decision followed a two-hour hearing in which the Trumps' lawyers accused James of doing an end run around their clients' constitutional rights by seeking testimony she could then use against them in a parallel criminal investigation.
Trump lawyer Alina Habba accused James of "selective prosecution and prosecutorial misconduct that this country has never seen," citing what she called Democratic attorney-general's "vile disdain" for Trump, a Republican.
Trump in a statement later on Thursday called the accusations false and accused James of a political agenda in targeting him and his family.
"It is a continuation of the greatest Witch Hunt in history - and remember, I can't get a fair hearing in New York because of the hatred of me by judges and the judiciary. Its not possible!" Trump said.
Last month, James said her nearly three-year investigation into the Trump Organization had uncovered significant evidence of possible fraud
She described what she called misleading statements about the values of the Trump brand and six properties, saying the company may have inflated real estate values to obtain bank loans and reduced them to lower tax bills.
The Trumps have not been accused of criminal wrongdoing.
Engoron declined the Trumps' request to put James' case on hold while the criminal case, led by Manhattan District Attorney Alvin Bragg, is pending. James joined that probe last May.
The criminal investigation resulted last July in tax fraud charges against the Trump Organization and its longtime chief financial officer Allen Weisselberg. Both pleaded not guilty.
Trump is suing to try to stop James' investigation.
Engoron ruled after Trump's longtime accounting firm Mazars USA decided last week to cut ties with him and the Trump Organization, saying it could no longer stand behind a decade of financial statements despite finding no material discrepancies.
