The sanctions were imposed on Myanmar to press for democracy and the release of opposition leader Aung San Suu Kyi.
However, they are now inflicting economic hardship and mass job loss on its people, a US official said on Thursday.
Reports from international groups in Myanmar show young women driven out of the country's hard-hit garment sector are being forced into prostitution.
The shocking claims were made by Matthew Daley, deputy assistant secretary of state for East Asia and Pacific affairs, who testified before subcommittees of the House International Relations Committee.
Economic sanctions signed into law by President George Bush last July include a ban on the import to the US of all Myanmar products, a freeze on certain of its assets and a ban on the export of financial services to Myanmar.
''In the long term, the garment sector will likely lose 100,000 jobs, most of which are filled by young women"
Matthew Daley, deputy assistant secretary of state for East Asia and Pacific Affairs
But the sanctions are proving to be a double-edged sword, according to Daley who said: "These measures immediately disrupted the economy in Burma.
"The garment sector was hardest hit and the (governing military) junta has been unable or unwilling to assist affected businesses or their employees," he said.
"The measures now in place send a clear signal to the junta to release Aung San Suu Kyi and other political prisoners and move down the path to democracy," Daley said.
"Unfortunately, the sanctions also affect ordinary Burmese... Some international NGOs (non-governmental organisations) have expressed concern that the destruction of already troubled export industries, especially the garment sector, will lead to significant unemployment and a spike in economic migrants seeking illegal work inside Burma or over the border in Thailand or China."
Sex and entertainment
Within the first month of sanctions, said Daley, "we estimate that more than 40,000 garment sector jobs were lost. In the long term, the garment sector will likely lose 100,000 jobs, most of which are filled by young women."
He said credible NGO reports indicated that some of the young women forced into unemployment by US sanctions "have entered the flourishing illegal sex and entertainment industries.
"Such effects are unfortunate, but Burma's greatest misfortune is the junta's misrule and the suffering of all the Burmese people, every day, under this military dictatorship."
Aung San Suu Kyi told visiting UN envoy Razali Ismail she was willing to work with the ruling junta on a new national reconciliation process, diplomats said Thursday.
But in meetings with the ruling generals, Razali said he was given no indication of when the 58-year-old Nobel peace laureate or other members of her National League for Democracy (NLD) will be freed from house arrest.