The U.S. Office of Special Counsel, which is unrelated to special counsel Robert Mueller's office, said in a letter to Trump that Conway has been a "repeat offender" of the Hatch Act while speaking in her official capacity during television interviews and on social media.
Trump and Vice President Mike Pence are exempt from the Hatch Act, but there are no exceptions for White House employees.
The agency does not have authority to fire Conway, who was appointed counselor by Trump, so it would up to the president to follow its recommendation and dismiss one of his most unwavering defenders.
The agency's letter states: "Ms. Conway's violations, if left unpunished, would send a message to all federal employees that they need not abide by the Hatch Act's restrictions. Her actions thus erode the principal foundation of our democratic system_the rule of law."
Conway told reporters who encountered her in the White House press office, "I have no reaction."