Hadi Matar, 24, is accused of wounding Rushdie, 75, on Friday just before the 'The Satanic Verses' author was to deliver a lecture on stage at an educational retreat near Lake Erie, New York state.
Rushdie was hospitalised with serious injuries in what has been dubbed an attack on free speech.
Matar pleaded not guilty to second-degree attempted murder and assault charges on Thursday during an arraignment hearing and was held without bail.
Matar was arraigned in Chautauqua County district court on an indictment returned earlier in the day by a grand jury that charged him with one count of second-degree attempted murder.
Hadi Matar
CHAUTAUQUA COUNTY JAIL
He faces a maximum sentence of 25 years in prison, and one count of second-degree assault. He wore a gray-striped jumpsuit, a white face mask and his hands were shackled.
His next court appearance was scheduled for September 22.
The attack came 33 years after Iran's Ayatollah Ruhollah Khomeini issued a fatwa calling on Muslims to assassinate Rushdie a few months after 'The Satanic Verses' was published.
Some Muslims saw passages about the Prophet Muhammad as blasphemous.
Rushdie, who was born in India to a Muslim Kashmiri family, has lived with a bounty on his head ever since – and spent nine years in hiding under British police protection.
In 1998, Iran's pro-reform government of President Mohammad Khatami distanced itself from the fatwa, saying the threat against Rushdie was over.
Salman Rushdie
Ritzau Scanpix Denmark
But the multimillion-dollar bounty has since grown and the fatwa was never lifted.
Khomeini's successor, Supreme Leader Ayatollah Ali Khamenei, was suspended from Twitter in 2019 for saying the fatwa against Rushdie was "irrevocable".
In an interview published by the New York Post on Wednesday, Matar said he respected Khomeini but would not say if he was inspired by the fatwa.
He said he had "read a couple of pages" of 'The Satanic Verses' and watched YouTube videos of the author.
Matar said: "I don't like him very much.
"He's someone who attacked Islam, he attacked their beliefs, the belief systems."
Iran's foreign ministry on Monday said Tehran should not be accused of being involved in the attack. Matar is believed to have acted alone, police have said.
Matar is a Shi'ite Muslim who was born in California to a family from Lebanon.
Prosecutors say he travelled to Chautauqua Institution, a retreat about 12 miles (19 km) from Lake Erie, where he bought a pass to Rushdie's lecture.
Witnesses said there were no obvious security checks at the lecture venue and that Matar did not speak as he attacked the author.
He was arrested at the scene by a New York State Police trooper after being wrestled to the ground by audience members.
Rushdie sustained severe injuries in the attack, including nerve damage in his arm, wounds to his liver, and the likely loss of an eye, his agent said.