The US State Department on Monday designated Hizbul Mujahideen's supreme commander Syed Salahuddin as a Specially Designated Global Terrorist (SDGT) and imposed sanctions on him.
He is the leader of the largest militant group that fights against security forces in India-held Kashmir.
The development surfaced hours ahead of the scheduled meeting between Indian Prime Minister Narendra Modi and US President Donald Trump.
He was designated a terrorist "under Section 1(b) of Executive Order (EO) 13224, which imposes sanctions on foreign persons who have committed, or pose a significant risk of committing, acts of terrorism that threaten the security of US nationals" or the national security, foreign policy, or economy of the United States, said a release issued from the US State Department.
The action bars US persons from financial transactions with Hizbul Mujahideen supreme leader Syed Salahuddin.
The department says that in September 2016, Salahuddin vowed to block any peaceful resolution to the Kashmir conflict. He threatened to train Kashmiri suicide bombers and turn the Kashmir valley “into a graveyard for Indian forces.”
The US says the militant group has claimed responsibility for several attacks.
The scheduled meeting between Modi and Trump is the first between the leaders of the world's two largest democracies. It takes place amid uncertainty over the relationship because of differences on trade and other issues.
Trump has focused on outreach to China, India's strategic rival, as he looks to Beijing to rein in North Korea. But Washington and New Delhi share concerns about China's rise as a military power.
In advance of the meeting, the Trump administration approved India's purchase of nearly two dozen unarmed surveillance drones. The deal, estimated to be worth about $2 billion, is still subject to congressional approval.