Yates' concern was that Russian Federation created a "compromise situation" where the national security adviser could be blackmailed.
The warning, which has not been previously reported, came less than 48 hours after the November election when the two sat down for a 90-minute conversation in the Oval Office.
Yates confirmed reports that she had told the White House, six days into Trump's administration, that Flynn, a former military intelligence chief, had not been honest with Vice President Mike Pence about his discussions with the Russian ambassador to Washington, leaving him vulnerable to leverage from Moscow.
Congressional committees began investigating after United States intelligence agencies concluded that Russian President Vladimir Putin had ordered hacking of Democratic political groups to try to sway the election toward Trump.
Yates, who was sacked by President Trump on January 30, said that it is believed that the Russian government had recordings of Flynn's call. Mr. Flynn resigned as NSA on February 13. White House press secretary Sean Spicer revealing this afternoon that the White House did not know how to take the warning from then Acting Attorney General Sally Yates because they did not think she was a Trump supporter.
Obama's concerns were related to the course of the investigation into Russian interference into the 2016 elections.More news: Clapper: US govt 'under assault' by Trump after Comey firing
Three days later, for reasons unrelated to Flynn, Trump fired Yates for refusing to defend his travel ban on individuals from seven Muslim-majority countries.
Yates testified that she was concerned the Russians could use the discrepancy to blackmail Flynn.
Making her first public statements about the issue, Yates said she feared Moscow could try to blackmail Flynn because it also knew he had not been truthful about conversations he had with Ambassador Sergei Kislyak about USA sanctions on Russian Federation.
The revelations came on the same day that former acting Attorney General Sally Yates testified about the events that led to Flynn's eventual firing.
At just 24 days, Lt. Gen. Michael Flynn had the shortest tenure as White House National Security Adviser of anyone to ever hold that post. "I hope that the American people recognize the severity of this threat and that we collectively counter it before it further erodes the fabric of our democracy", Clapper said yesterday. She also said that her office informed the White House of this 18 days before Flynn was sacked.