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8 year oldSpeaking on state TV, Mr Jammeh cited "abnormalities" in the vote and called for fresh elections.
Mr Jammeh, who came to power in a coup in 1994, suffered a shock defeat to Adama Barrow, who won more than 45% of the vote.
The US "strongly condemned" Mr Jammeh's statement.
"This action is a reprehensible and unacceptable breach of faith with the people of The Gambia and an egregious attempt to undermine a credible election process and remain in power illegitimately," said state department spokesman Mark Toner.
Mr Barrow, a property developer, is due to take office in late January. Neither he nor his party have so far commented on Mr Jammeh's statement.
The Gambia is the smallest country on mainland Africa, with a population of fewer than two million.
Mr Jammeh said that he now rejected the results of the election "in totality".
"After a thorough investigation, I have decided to reject the outcome of the recent election," Mr Jammeh said.
"I lament serious and unacceptable abnormalities which have reportedly transpired during the electoral process.
"I recommend fresh and transparent elections which will be officiated by a God-fearing and independent electoral commission."
Yahya Jammeh appeared on state TV brandishing a document supposedly proving irregularities when the votes were tallied last week.
Mr Jammeh said the results were unacceptable. He said figures had been transposed swelling the number of votes in favour of his opponent, Adama Barrow, whom he recognised as president-elect live on television after the election results were announced.
Yahya Jammeh called for a fresh vote.
Over the past week people have been celebrating the end of his 22-year-long rule but tonight The Gambia's future looks uncertain again.
The government in neighbouring Senegal condemned the move, and called for a peaceful transfer of power.
A Human Rights Watch spokesman also said it was "deeply concerned".
"The international community, notably [regional bloc] Ecowas and the African Union, should loudly protest any unlawful attempt to subvert the will of the Gambian people," said Babatunde Olugboji, deputy programme director.
Only last week, Mr Jammeh was shown on state TV calling Mr Barrow to wish him well.
"You are the elected president of The Gambia, and I wish you all the best. I have no ill will," he said at the time.
According to the electoral commission, in the election on 1 December:
In his 22 years in power, Mr Jammeh acquired a reputation as a ruthless leader.
Ahead of the election, Human Rights Watch accused him of using violence to silence critics. The group said two activists had died in custody and dozens of people had been jailed and denied medical or legal help.
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