The United states has cut aid to Uganda and cancelled a military exercise in response to a law that imposes harsh penalties on homosexuality.
A White House statement on Thursday said the move was intended to "reinforce" support for human rights for Ugandans regardless of sexual orientation.
Uganda's new law, signed by President Yoweri Museveni in February, imposes jail terms of up to life for "aggravated homosexuality" which includes homosexual sex with a minor or while HIV-positive.
Widely condemned by donor countries, the law also criminalises lesbianism for the first time and makes it a crime to "help" individuals engage in homosexual acts, the Reuters news agency reported.
Western donors, including the US, had halted or re-directed about $118m in aid to the east African nation's economy before Thursday's announcement.
Projects targeted by the cuts include funding for a $2.4m Ugandan community policing program, which was stopped in light of a police raid on a US funded health program at Makerere University.
The White House will move funding for salaries of Ugandan health ministry employees to non-governmental organisations, and reallocate money earmarked for projects in Uganda to another African country, which it did not name.
In addition to financial sanctions, the US also said it would impose visa restrictions on Ugandans it believes have been involved in human rights violations, including gay rights.
It also canceled plans for a US sponsored military exercise in Uganda that was meant to include other east African countries. A date had not yet been set for the exercise.
Uganda is a key US ally in the fight against the al-Shabab armed group in Somalia, where Ugandan troops form the backbone of an African Union force battling the rebels.
US special forces have also been involved in the hunt for Joseph Kony, a Ugandan rebel commander hiding out in neighbouring countries, who is seeking to topple the government.
In Kampala, a government official asked about the US measures said Uganda would not alter its decision to toughen laws against homosexuals.
"Uganda is a sovereign country and can never bow to anybody or be blackmailed by anybody," government spokesman Ofwono Opondo said.
Homosexuality is taboo in most African countries and illegal in 37, including in Uganda where it has been a crime since British rule.