Mandela's name was on the list because of his membership of the African
National Congress, or ANC, which during the Cold War was considered a communist organisation by the US.
John Kerry, the Massachusetts senator, said after the bill passed the US Senate
on Friday that the US had "moved closer at last to removing the great shame of dishonouring this great leader by including him on our government's terror watch list".
The ANC has been South Africa's ruling party since 1994, after the nation's former racist system of government known as apartheid was toppled.
Mandela, a Nobel Peace Prize winner, spent 27 years in prison for his work with the ANC and its battle against the South African government.
He is due to celebrate his 90th birthday on July 18.
In April, Rice urged a US Senate committee to remove the restrictions on the ANC party and some of its officials, calling it a "rather embarrassing matter that I still have to waive in my own counterpart, the foreign minister of South Africa, not to mention the great leader, Nelson Mandela," into the US.