The US State Department has designated Nigeria's Boko Haram and a splinter group named Ansaru as "foreign terrorist organisations".
The US on Wednesday said Boko Haram had links to Al-Qaeda in the Islamic Maghreb (AQIM) and was responsible for "thousands of deaths in northeast and central Nigeria over the last several years, including targeted killings of civilians".
It added that Ansaru had earlier in 2013 kidnapped and executed seven international construction workers.
"These designations are an important and appropriate step, but only one tool in what must be a comprehensive approach by the Nigerian government to counter these groups through a combination of law enforcement, political, and development efforts," the statement said.
Boko Haram, which translates as "Western education is sinful", stepped up its attacks against civilians and government installations this year, prompting the government to declare a state of emergency in the states of Borno, Yobe and Adamawa last May.
The group has since 2009 been fighting to create an Islamic state in the country's mainly Muslim north.
The statement urged Nigeria to continue protecting civilians and to ensure human rights are respected, an apparent reference to accusations by rights groups that government efforts to rein in the group have led to violations of human rights.
Among its most lethal attacks, Boko Haram carried out indiscriminate attacks in Nigeria’s Benisheikh in September 2013, killing more than 160 innocent civilians, including women and children, the State Department said.
Boko Haram has also conducted attacks against international targets, the department said, including a suicide bombing that killed 21 people at the UN building in Abuja on August 26, 2011. Many of those who died were aid workers supporting development projects across Nigeria, the statement added.
It said Ansaru's attacks had focused on Nigerian military and Western targets, citing the November 2012 raid on a police station in Abuja that killed Nigerian police officers and freed detained "terrorists" from prison.
Citing Congressional sources, the Reuters news agency said Wednesday’s move was significant as it directs US law enforcement and regulatory agencies to block business and financial transactions with Boko Haram.
The House Foreign Affairs Committee, which a source said has been notified of the decision, has scheduled a hearing on the group for Wednesday, Reuters reported.
"The likelihood of more hearings on this issue may have been a final straw in encouraging the State Department to acknowledge something which has been apparent for some time - the growing relationship between Boko Haram and al-Qaeda in the Arabian Peninsula," said Patrick Meehan, a Pennsylvania Republican who convened his own hearing on the issue.