The Ulchi Freedom Shield exercise, which began on August 17, will now run through August 21, South Korea's Joint Chiefs of Staff and a Pentagon official said.
The exercise had originally been scheduled to conclude on August 27.
South Korean Defence Minister Ahn Gyu-back said the allies were moving to cancel the second phase of the exercise, South Korean media reported. That phase had been expected to involve counterattack operations following an initial defensive phase, media said.
At the suggestion of the United States, the countries agreed to make partial adjustments to the duration and scope of the drills, the JCS said. Some combined field manoeuvre training would also be scaled back, although details were still being discussed.
A US Department of Defence official said the department had substantially reduced the exercise and associated live-training events, with some cancelled or converted to simulations.
The changes would preserve essential readiness and training objectives, with no degradation to US training objectives, the official said.
The announcement follows Trump's order on Sunday to "substantially reduce" US participation in the annual exercise, citing his "very good relationship" with North Korean leader Kim Jong-un.
North Korea again denounced the drills on Wednesday, saying it would continue exercising its right to self-defence against what it called military threats from Washington and Seoul, state media KCNA reported.
A KCNA commentary called the United States and South Korea "warmongers" raising tensions on the Korean Peninsula.
It did not mention Trump, his order or the reported plans to reduce the exercise.
Trump has also pushed aides to arrange an in-person meeting with Kim as soon as this autumn, the Wall Street Journal reported, citing US officials.
Trump has discussed holding talks during a possible November trip to Asia for the Asia-Pacific Economic Cooperation summit in Shenzhen, China, the newspaper said.
Reuters could not immediately verify the report.
The White House did not respond to a request for comment on its approach to North Korea or the military exercises.
Trump said on Monday that Kim had responded to his outreach, without disclosing the nature of the contact.
Pyongyang routinely condemns joint US-South Korean military exercises as rehearsals for invasion, while Washington and Seoul say they are defensive and necessary to maintain readiness against North Korea's military threats.
South Korea's Foreign Minister Cho Hyun said at a parliamentary hearing on Wednesday that neither South Korean nor US officials had been aware in advance of Trump's order.
South Korean President Lee Jae Myung said the Ulchi exercises were defensive and that Seoul had no intention of using them to attack North Korea or heighten tensions on the peninsula.
