Under a special 90-day measure, non-profit groups and US citizens can donate money directly to non-governmental organisations working in Iran on reconstruction and relief efforts after the quake that killed up to 50,000 people.
The administration also moved to make it easier for relief groups to bring donated equipment such as satellite telephones and computers into the country.
"The president has directed Secretary of State Colin Powell and Secretary of the Treasury John Snow to take significant steps to expedite disaster relief and humanitarian aid operations in response to the devastating earthquake in Bam,
Iran," the White House said in a statement issued on Wednesday from Crawford, Texas, where Bush is vacationing.
"The Iranian people deserve and need the assistance of the international community to help them recover from the catastrophic results of last week's earthquake," the White House said.
In the aftermath of the quake in the ancient city of Bam, tens of thousands of survivors were spending cold nights in tents while others were in hospitals.
"The Iranian people deserve and need the assistance of the international community to help them recover from the catastrophic results of last week's earthquake"
The White House
The United States broke ties with Tehran following the 1979 Islamic revolution, and last year the Bush administration branded it a member of an "axis of evil," along with Iraq and North Korea.
However, after the earthquake, Bush said the United States wanted to join other nations in sending aid to Iran.
The move to ease the sanctions came at the initiation of Powell after he consulted with members of Congress and determined the action was warranted because of the "extraordinary" needs created by the disaster.
The action will speed relief by allowing humanitarian groups to forgo a lengthy licensing procedure they would have otherwise had to follow to make transfers of funds into Iran.
Certain supplies such as food, clothing, tents and some medicines do not require a licence. Now, aid groups can put cash donations to use for such purposes as rebuilding homes, schools and hospitals.
"Basically, they're getting rid of any blockages to letting the aid spigot go forward," said one Bush administration official.
Dr Assad Yavari, vice chairman of the Los Angeles-based nonprofit, Iranian Muslim Association of North America, said his group had raised $750,000 through telethons and other efforts. The group had been waiting to hear about the status of the sanctions before making plans to put the money to use.
"It's excellent news. It's going to help us tremendously because now we can use the money (we have raised)more efficiently"
Dr Assad Yavari,
Iranian Muslim Association of North America
"It's excellent news," Yavari said. "It's going to help us tremendously because now we can use the money more efficiently."
The administration specified that no funds could be transferred to Iran through anyone on a list of so-called "specially designated nationals" that Treasury maintains as a type of blacklist to restrict any broader trade with Iran.
Even the limited easing of US sanctions represents some thaw in relations between America and Iran, which have often been marked by tough rhetoric on both sides.
Iranian hard-liners regularly refer to the United States as the "Great Satan," while Washington's hawks routinely denounce the Islamic Republic as a supporter of global terrorism.