The state department's report, which was released on Wednesday, said that Iran and Syria were the two countries that should be highlighted as having the worst human rights problems.
The report said conditions in Iran had worsened in 2005 under Mahmoud Ahmadinejad, the new Iranian president.
It also accused Iran of interference in neighbouring Iraq and of supporting what it called terrorists.
Similar accusations about supporting terrorism were made against Syria.
The report said Iraq performance
was handicapped by violence
The report also called the human rights records of some key Arab allies poor or problematic.
It cited flawed elections and torture of prisoners in Egypt, beatings, arbitrary arrests and a lack of religious freedom in Saudi Arabia, and flogging as punishment for adultery or taking drugs in the United Arab Emirates.
The study, which has been published each year since 1977, calls records in Saudi Arabia and Egypt poor, and the UAE record problematic.
On Iraq, the report said the government's performance was handicapped by the violence and terrorism that has an impact on every aspect of life.
It cited increased reports of killings that may have been politically motivated.
In Israel, the report said, the government generally respected the rights of its citizens, but it noted some problems.
Among them, the report said, were "serious abuses by some members of the security forces against Palestinian detainees".
The report also said there was discrimination against the country's Arab citizens and against non-Orthodox Jews.