President George Bush said in a statement on Monday the "crisis" between the two countries which led to the declaration of a national emergency on 7 January 1986 had not been fully resolved.
The statement did not specify the duration of the renewal, but such sanctions - which include a freeze on assets in the United States - have been renewed annually since they were first imposed in 1986.
Although Bush praised the north African country's December announcement to dismantle its weapons of mass destruction programmes and allow international inspections of its nuclear facilities, he said action had to follow words.
"Libya's agreement marks the beginning of a process of rejoining the community of nations, but its declaration... must be followed by verification of concrete steps.
"As Libya takes tangible steps to address those concerns, the United States will in turn take reciprocal tangible steps to recognize Libya's progress," he said.
The US leader also acknowledged lingering US concerns about its "role with respect to terrorism", as well as its "poor human rights record".
No international sanctions
Libya has been under international sanctions since 1992 over the bombing of PanAm Flight 103, a US airliner, over the Scottish town of Lockerbie that killed 270 people in December 1988.
The United Nations lifted its embargo in September after Tripoli agreed to pay $2.7 billion in compensation and accept responsibility for the bombing, but US sanctions have remained in place.
The United States and Libya broke off diplomatic ties in 1981, and US economic and political sanctions first imposed in January 1986 by then-president Ronald Reagan have been in place for more than two decades.