WASHINGTON—The Trump administration took direct aim Thursday at California’s role as de facto auto regulator for the nation, proposing to end the state’s ability to set its own fuel-efficiency standards and to dial back Obama-era limits on tailpipe emissions.

The proposal would eliminate the sharp increase in fuel-economy mandates adopted under the Obama administration in collaboration with California. The rules require car makers to boost fuel efficiency to 50 miles a gallon on average by 2025, thereby cutting emissions....