Mr Trump bought the New York Plaza, one of the world's most highly prized hotel properties, in the late 1980s for an estimated $600m (£380m). The hotel is now valued at $325m (£208m).
The Central Park hotel was once managed by Mr Trump's former wife, Ivana, who spent 18 hours a day renovating it in the last years of her marriage to Mr Trump. It was also the location for his marriage to his second wife, Marla Maples, in front of 1,500 guests.
The hotel purchase is the latest in a series of international deals by the 37-year-old Saudi prince - the multi-billionaire nephew of Saudi Arabia's King Fahd.
Regarded as a relative novice in the world of deal-making, the prince is becoming well known for his corporate raiding ambitions. The prince now owns large stakes in the US banking giant Citibank as well as a controlling stake in the Four Seasons hotel chain. He sent ripples through the banking world last year with his rescue of Euro Disneyland, the troubled Parisian theme park, without the help of a single investment banker.
The Plaza is the second slice of Mr Trump's empire snapped up by the prince. Healso owns Mr Trump's former yacht, which spends the summer moored off St Tropez.
A statement from the prince's office in Riyadh said the agreement would allow for a joint venture between subsidiaries of Singapore-based CDL Hotels and an entity controlled by Prince Alwaleed to join as partners with Mr Trump.
Mr Trump now owns only 51 per cent of the hotel. The remainder is held by a consortium of banks led by Citibank, which are in effective control of the hotel because of Mr Trump's debts to them.
CDL Hotels International is the international arm of Singapore's Hong Leong Group.Reuse content