The US State Department has named Pakistan's Jamaat-ud-Dawa (JuD) a "foreign terrorist organisation", a status that freezes any assets it has under the US jurisdiction.
Jamaat-ud-Dawa calls itself a humanitarian charity but is also seen as a front organisation for the banned Lashkar-e-Taiba (LeT), a Pakistan-based group that fights Indian soldiers in India-administered Kashmir and accused of 2008 Mumbai attacks that killed 166 people.
"In December 2001, the Department of State designated LeT as a Foreign Terrorist Organisation. Since the original designation occurred, LeT has repeatedly changed its name in an effort to avoid sanctions," the State Department said in a statement on Wednesday.
"More specifically, LeT created Jamaat-ud-Dawa as a front organisation, claiming that the group was an 'organisation for the preaching of Islam, politics, and social work'."
The US Treasury Department separately announced that it was designating two LeT leaders, Nazir Ahmad Chaudhry and Muhammad Hussein Gill, as "specially designated global terrorists", imposing economic sanctions on them.
JuD's listing will prohibit US entities or citizens from dealing with the organisation.
Responding on its Twitter feed, JuD said its respect within the eyes of Pakistani people and Muslims around the world "cannot be faded away by worthless propaganda".
"US allegations and [their] timing are precisely due to 'strategic partnership' with India in Afghanistan; against Pakistan," the JuD Twitter feed read.
"We reject the misleading and malicious assertions by the US state and treasury departments as a fact-less exercise and propaganda against us."
JuD operating openly
JuD continues to operate openly in Pakistan, and its leader, Hafiz Saeed, holds public rallies and gives interviews.
The group says it is currently carrying out charitable work in the remote border region of North Waziristan to help residents displaced by the latest military operations.
For their part, Indian politicians have auded the US sanctions.
"The banning of Jamaat-ud-Dawa is a welcome move on the parts of United States authorities. India and United States and other countries need to work together to curb this menace of terror in the world," Captain Abhimanyu of the ruling Bharatiya Janata Party said on Thursday.
India blames Jamaat-ud-Dawa leader Saeed for the Mumbai attacks, but Pakistan argues India has failed to provide incriminating evidence against him.
The designation comes as NATO troops in Afghanistan are pulling out, and regional rivals Pakistan and India compete with each other for influence with Kabul.
Some fear the competition may spill into open conflict between the two nuclear-armed nations, who have fought three wars since independence two of them over disputed Kashmir region.