Matthew 19:24 states, "And again I say unto you, It is easier for a camel to go through the eye of a needle, than for a rich man to enter into the kingdom of God."
I do not know the origin of the teaching that the "Needle's Eye" refers to a small gate into Jerusalem, but this teaching is mentioned in the Hasting's Dictionary of the Bible that was published in 1901. What is said in that dictionary is helpful (Volume 3, p.505): "An attempt is sometimes made to explain the needle's eye as a reference to the small door, a little over 2 ft. square, in the large heavy gate of a walled city. This mars the figure without materially altering the meaning, and receives no justification from the language and traditions of Palestine. There is no custom of calling this small opening 'the eye'; it is usually named 'the small door,' 'hole,' of 'window.' "
Two verses below the verse in question (Matthew 19:26), in direct reference to the camel going through the eye of the needle and the salvation of a rich man, Jesus states: "With men this is impossible, but with God all things are possible." The idea that a camel could squeeze through the small door in the gate is possible with man; not impossible. However, to put a camel through the eye of a needle and it still be a camel after going through is an impossibility with man. That is the picture Jesus meant for us to get. To change it to a small gate entirely ruins the plain meaning of the text. It makes salvation the result of man's diligent effort. In short, it is doctrinally wrong.