As part of its tougher line against Tehran, the Trump administration has designated Iran's elite Revolutionary Guard a terrorist organization. Iran said it would respond in kind.
Washington put the elite Iranian Revolutionary Guard Corps (IRGC) on its list of foreign terrorist groups on Monday.
In response, Iran's Supreme National Security Council applied its own terrorist designation to the US Central Command, also called CENTCOM, along with US forces. Iran also labeled the US a "state sponsor of terrorism."
The move marks the first time the US has designated a part of another government a foreign terrorist organization.
"This unprecedented step, led by the Department of State, recognizes that Iran is not only a State Sponsor of Terrorism, but that the IRGC actively participates in, finances, and promotes terrorism as a tool of statecraft," a statement from US President Donald Trump's press secretary said.
Trump's office said that the designation "sends a clear message" to Tehran that its actions have consequences.
The designation means that sanctions would be imposed on the IRGC, including a freeze on assets that it may have in US jurisdictions. It will also ban Americans from doing business in any way or giving material support.
Read more: What is Iran's Revolutionary Guard?
Upping pressure on Iran
Brian Hook, the US special representative for Iran, told DW that the terror group designation gives the US "a range of new tools to stigmatize and isolate the IRGC," which could have a significant impact on Iran's economy.
"We think it is very important to expose the IRGC for what it is: It has all the attributes of a terrorist organization," Hook told DW in Washington.
"We should not lie to ourselves that this is a benign entity of the Iranian government that just has a role in its economy. It’s much bigger, much darker and much more brutal than that," he added.
Hook said that sanctions on the IRGC would not only deny the Iranian government "the revenue it needs to conduct its foreign policy," but Washington also hopes it will put pressure on Tehran to get "a new and better and more comprehensive deal that would succeed the Iran Nuclear Deal."
'Election-eve gift' to Israel's Netanyahu
Iran has often accused the US of acting on behalf of Israeli Prime Minister Benjamin Netanyahu, who is highly hostile toward Tehran.
On Monday after the announcement was made, Iran's Foreign Minister Javad Zarif blasted the terrorist designation on Twitter as another "dangerous US misadventure" in the region and a "misguided election-eve gift to Netanyahu."
The move from Washington comes on the eve of Tuesday's general election in Israel. On Monday, Netanyahu thanked Trump on Twitter, and said the US designation "served the interests of our countries and of countries in the region."
Undesirable consequences for the US?
The US currently designates some 60 groups around the world as foreign terrorist organizations, but none of them is a state-run military like the IRGC.
Critics have warned that the US decision could, however, leave US military and intelligence officials open to similar declarations by unfriendly governments abroad.
They say it could also greatly complicate the work of US military and diplomatic personnel by restricting interaction with authorities, for example in Iraq or Lebanon, who have close ties to the IRGC.
In Iraq, this would affect contact with many Shiite militias and political parties. In Lebanon, the Hezbollah movement, which forms part of the government, is also heavily linked with the IRGC.
US officials are already banned from contact with Hezbollah, which has also been designated a foreign terrorist organization by Washington.
Critics of the move also warn of possible Iranian retaliation against American interests that could target embassies and consulates.
Read more: There is 'no light on the horizon' in Iran
Growing anti-Iran sentiment
Such fears have dissuaded previous US administrations from blacklisting the IRGC. However, the present US government contains a number of Iran hard-liners, with notably Secretary of State Mike Pompeo and National Security Adviser John Bolton vehemently criticizing what they describe as Iran's "malign activities" in the Middle East.
The IRGC was established after the 1979 Islamic Revolution in Iran. It is the country's most powerful security organization and exerts a strong influence over much of the Iranian economy and political system.
DW's Washington correspondent Alexandra von Nahmen contributed to this report.
rs, wmr, tj/msh (AP, Reuters, dpa)