The survey shows 62% of Americans are dissatisfied with the way things are going, while only 49% approve of the way Mr Bush is handling his job, on a par with the lowest figure he has reached during his presidency.
The poll, conducted early this week, continues to show a polarised nation split right down the middle, with major events such as those taking place in Falluja and the pictures of Iraqis being tortured having little impact on attitudes because most of the electorate has already made up its mind.
Since mid-January, the president's approval ratings have moved only within a narrow band, between 49% and 53%.
With only six months to go before the presidential election, the Democratic candidate, Massachusetts senator John Kerry, is drawing 49% support from likely voters against 48% for Mr Bush. In such a tight race the inclusion of a third candidate, Ralph Nader, could make all the difference.
Many Democrats still blame Mr Nader for Al Gore's defeat at the 2000 election.
Current polls indicate that in a three-horse race Mr Kerry and Mr Bush will each gather 47%, with Mr Nader winning 3%.
But the Gallup survey is troubling for Mr Bush as it shows a gradual erosion of his popularity and his support, and suggests that the huge amount of money he has spent on advertisements in swing states attacking Mr Kerry has only left him even.
The last time Americans said they were this dissatisfied with the direction their country was heading, was in early 1996 when a stalemate in Congress over a budget agreement forced the federal government to shut down.
That year President Bill Clinton went on to win in a landslide against the Republican challenger, Bob Dole.
Meanwhile, according to another recent poll by the Pew Research Centre, there is a growing number who believe the troops should return home, that the president does not have a clear policy on Iraq, and who disapprove of his handling of the economy and of Iraq.
Even on his strongest suit, the war against terrorism, a bare majority support him, with the figure falling.
The Pew poll, released on Wednesday, shows that public confidence in the Iraq conflict has dipped since January.
Although six in 10 Americans still feel that the US was right to use military force, those who want to keep the troops in the country has nearly halved, down from 63% to 32%.