In a speech broadcast live on state television on Tuesday, Rouhani said sanctions against Khamenei would fail because he had no assets abroad.
Rouhani described the latest round of sanctions as a sign of US desperation.
"The White House actions mean it is mentally retarded," he said.
Iranian officials have used this insult in the past about President Donald Trump but it was a departure from Rouhani's own comparatively measured tone.
"Tehran's strategic patience does not mean we have fear," Rouhani said.
Trump targeted Khamenei and other top Iranian officials with sanctions on Monday, to increase pressure on Iran after Tehran's downing of an unmanned US drone last week.
The targets of the new sanctions include senior military figures in Iran, blocking their access to any financial assets under US jurisdiction.
Washington said it will also impose sanctions on Iran's Foreign Minister Mohammad Javad Zarif this week.
"You sanction the foreign minister simultaneously with a request for talks," Rouhani said and called the sanctions "outrageous and idiotic".
Foreign ministry remarks
Rouhani's remarks come after the Iranian foreign ministry on the same day said that the new US sanctions imposed on Iran permanently closed the path to diplomacy between Tehran and Washington.
"Imposing useless sanctions on Iran's Supreme Leader and the commander of Iran's diplomacy (Zarif) is the permanent closure of the path of diplomacy," Foreign Ministry spokesman Abbas Mousavi said in a tweet.
"Trump's desperate administration is destroying the established international mechanisms for maintaining world peace and security."
However, US National Security Adviser John Bolton said that Trump is open to negotiations and "all that Iran needs to do is walk through that open door".
The US wants to hold talks to "verifiably eliminate Iran's nuclear weapons programme, its ballistic missile delivery systems, its support for international terrorism and other malign behaviour worldwide," Bolton said in Jerusalem.
He said US envoys have been in the region working to find a path to lowering tensions between the two countries, but that the silence of the Islamic Republic has been "deafening".
Last year Trump pulled out of the 2015 nuclear accord between Iran and world powers that curbed the Islamic Republic's nuclear weapons programme in exchange for the lifting of crippling economic sanctions.
Relations in the region have worsened significantly since then.
A year after the US withdrawal from the deal, Iran said in May it would reduce compliance with some elements of the nuclear agreement, if European signatories to the deal did not protect Iran's oil and banking sectors from reimposed US sanctions.
Washington has since added new sanctions.
'Khamenei won't be affected'
Al Jazeera's Dorsa Jabbari, reporting from Tehran, said the US decision to sanction the supreme leader would likely not have much effect.
"Ayatollah Ali Khamenei has not left Iran in over 30 years since he was president in 1989. The last time he left Iran was on a state visit to China in April 1989," she said.
The Al Jazeera correspondent said the announcement that Iranian foreign minister would be sanctioned has come as a surprise in Iran.
"Zarif is a career diplomat who lived in the US. He was at the UN for many years. He is known as the face of the Islamic Republic on the international stage."
Tensions have escalated in the region in recent weeks following a series of attacks on oil tankers in the Gulf. The US and its regional allies - Saudi Arabia and United Arab Emirates (UAE) - have blamed Iran for the attacks - a charge Tehran has denied as "baseless".
The downing of the US surveillance drone last week almost brought the two foes to the brink of war, with Trump saying he initially approved attacks on Iran in retaliation of the drone shootdown but later pulled back.
Tehran said the drone violated its airspace but Washington insisted it was flying over international waters in the Gulf.
The US president has said he is not seeking war with Iran, as he dispatched his top diplomats - US Secretary of State Mike Pompeo and John Bolton - to the Middle East to shore up support against Iran.
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