The president plans a 6:10 p.m. ET address to the nation explaining his veto of the $124 billion measure, which calls for most U.S. troops to be out of Iraq by March 2008.
Before sending the bill to the president Tuesday afternoon, Democratic congressional leaders urged Bush to sign the bill and begin winding down the war.
"A veto means denying our troops the resources and the strategy they need," said Senate Majority Leader Harry Reid, D-Nevada. "After more than four years of a failed policy, it's time for Iraq to take responsibility for its own future."
The spending bill, which Congress passed last week, funds military operations in Afghanistan and Iraq, but it also calls for the withdrawal of U.S. troops beginning in October, with the goal of getting all U.S. combat forces out of Iraq by the end of March 2008.
Bush and his Republican allies in Congress call the withdrawal timetable contained in the bill an admission of defeat.
Bush declared an end to "major combat" in Iraq in a May 1, 2003, speech from the deck of the aircraft carrier USS Abraham Lincoln. However, U.S. troops have been battling an ongoing insurgency since then, and more than 3,300 Americans have died in Iraq since that address.
White House spokeswoman Dana Perino accused congressional Democrats of "a trumped-up political stunt" by sending the bill to the president on the anniversary of his speech.
Bush: Failure 'unacceptable to the civilized world'
The president headed back to Washington on Tuesday afternoon after a visit to U.S. Central Command headquarters at MacDill Air Force Base, outside Tampa, Florida.
He told American and allied military officers there that a U.S. failure in the four-year-old war "should be unacceptable to the civilized world."
Bush said the current push to pacify Baghdad and the western province of Anbar has produced progress, but will need several months to succeed.
He said the United States and its allies were faced with a choice at the end of 2006 -- tamp down the wave of sectarian killings that followed the February 2006 bombing of the al-Askariya Mosque in Samarra, a revered Shiite Muslim shrine, or withdraw.
"Withdrawal would have increased the probability that coalition troops would be forced to return to Iraq one day and confront an enemy that is even more dangerous," Bush said. "Failure in Iraq should be unacceptable to the civilized world. The risks are enormous."
The war is now widely unpopular at home, with 32 percent of Americans in a recent CNN poll supporting the conflict and 60 percent siding with Congress on the issue.
The veto would be the second of Bush's presidency. The first, in July 2006, killed a bill that would have expanded federal funding for embryonic stem-cell research.