Tripoli blames the infections on five Bulgarian nurses and a Palestinian doctor, who were convicted last year of deliberately infecting more than 400 children at a hospital in Benghazi.
"Libya will boycott Bulgarian companies and shut the doors of all investment and trade opportunities for Bulgarian companies because the Bulgarian government has ignored demands to take responsibility for the action of its citizens in the HIV case," the official said in Tripoli on Tuesday.
Bulgarian Deputy Foreign Minister Gergana Grancharova told state radio BNR: "We have first to clarify the situation and then to comment."
The Libyan official, who did not want to be identified, also cited pressure on authorities from the families of the infected children for Tripoli's move against Sofia.
He did not say when the embargo would become effective.
The HIV case has set back Libya's
bid to win friends in the West
"The boycott decision was also prompted by the Bulgarian government's campaign to tarnish Libya's image," he added, without elaborating.
The medics, who have been sentenced to death by firing squad, insist they are innocent and that the only evidence against them were confessions extracted under torture.
The supreme court will rule in late May on an appeal by the five nurses and the doctor.
Asked why Tripoli was taking the embargo decision before the ruling, another official said the move was not related to the court's verdict.
"It is a political decision," he said.
At least 40 of the 426 infected children have died of Aids, increasing widespread outrage in Libya over the case.
"The Bulgarian government has ignored demands to take responsibility for the action of its citizens in the HIV case"
Libyan government official
The US and the European Union have criticised the verdicts, which have impeded Tripoli's efforts to emerge from decades of diplomatic isolation and renew ties with the West.
Aids experts testified to a lower court last year that the epidemic started before the nurses arrived at the hospital in eastern Libya, possibly due to poor hygiene or the unsafe use of syringes and blood products.
The nurses have been in prison since 1999.
Tripoli has said that if Sofia pays financial damages to the victims' families, builds a modern hospital in Libya, and provides medical treatment in Europe, it might release them.
Sofia has rejected paying financial compensation because it says the nurses are not guilty. Last month, Libyan leader Muammar al-Qadhafi rejected calls from the West to release them.
It was not clear what impact the embargo would have on trade with oil-rich Libya where a Libyan source told Reuters Bulgarian firms are involved mainly in farm and irrigation projects.
No official trade figures were immediately available.