"The Kremlin does not have compromising information on Trump," President Vladimir Putin's spokesman Dmitry Peskov told journalists.
He called the claims published by US media outlet Buzzfeed and attributed to a former British intelligence operative a "total fake" and "an obvious attempt to harm our bilateral relations".
The claims are aimed at "keeping relations (with the United States) in a state of deterioration," instead of becoming constructive, Peskov said.
He also denied allegations that the Kremlin gathered compromising information on the Democratic candidate Hillary Clinton, saying that "the Kremlin does not work on gathering compromising information".
The Kremlin spokesman described the dossier as 'pulp fiction,' adding that 'undoubtedly you need to react to this with a degree of humour'.
But he said that it showed that "there are people whipping up hysteria in order to maintain this atmosphere of a witch hunt".
He spoke after Trump on Twitter called the allegations "a total political witch hunt."
The Kremlin works to "arrange relations of the Russian president with our Western partners firstly in the interests of the Russian people and secondly in the interests of global peace and security," Peskov insisted.