The imam has also been linked to Umar Farouk Abdulmutallab, a Nigerian student accused of trying to blow up a Detroit-bound flight with explosives in his underwear on December 25.
By "designating" al-Awlaki under Executive Order 13224, the US treasury department has frozen his US assets and outlawed any dealings with him.
"Anwar al-Awlaki has proven that he is extraordinarily dangerous"
Stuart Levey, under secretary for Terrorism and Financial Intelligence
Weeks after the September 11 attacks, President George Bush signed the "Executive Order on Terrorist Financing,"granting the treasury, state and justice departments the authority to freeze the assets of foreign individuals or groups and their international affiliates who are deemed to pose a threat to the United States.
According to a treasury department statement, al-Awlaki is a key leader of al-Qaeda in the Arabian Peninsula (AQAP), has pledged an oath of allegience to its emir, Nasir al-Wuhayshi, and "plays a major role in setting the strategic direction for AQAP".
Al-Awlaki was imprisoned in Yemen in 2006 on charges of kidnapping for ransom and being involved in an al-Qaeda plot to kidnap a US official but was released from jail in December 2007 and subsequently went into hiding in Yemen, according to the treasury department.
A US official said in April that the administration of Barack Obama, the US president, had authorised the killing of al-Awlaki, after US intelligence agencies concluded the cleric was directly involved in anti-US plots.
Al-Awlaki told Al Jazeerain February that "it would have been better" if Abdulmutallab had targeted a US military plane or base but that his attempted bombing of a civilian airliner was justified because "the American people live [in] a democratic system" and "take part in all [their] government's crimes".
In December, Yemeni forces backed by US "intelligence and support" launched an airstrike on a meeting of senior al-Qaeda members thought to include al-Awlaki, according to the Washington Post.
Gregory Johnsen, a Yemen specialist and PhD candidate at Princeton University, wrote in an April op-ed in Newsweekthat al-Awlaki is "at best, a midlevel functionary in a local branch [of al-Qaeda]," and that killing him would do more harm than good.
"There are dozens of men who could do more harm to the United States, and killing al-Awlaki would only embolden them and aid in recruitment," Johnsen wrote.