The sanctions target the 125,000-strong Iranian revolutionary guard (IRG), one of the best-resourced parts of the country's military, with its own tanks and planes. It also owns hotels, oil companies and other businesses. The Bush administration went a step further with the IRG's elite Quds division, responsible for covert actions abroad, labelling it a terrorist organisation, the first time a state's military has been put on America's terrorist list.

The Quds force, numbering about 15,000, is alleged by the US to be involved with Lebanon's Hizbullah and groups elsewhere in the Middle East.

Making the announcement at a press conference, the US secretary of state, Condoleezza Rice, said the punitive moves were intended "to confront the threatening behaviour of the Iranians". The sanctions and other steps would "increase the costs to Iran of its irresponsible behaviour".

The administration also imposed sanctions on three Iranian state-owned banks: Bank Melli and Mellat, for alleged arms proliferation, and Bank Saderat, which was labelled "a terrorist financier".

In addition to the IRG and the banks, eight individuals and several other companies are covered by the sanctions.

The US decision to act unilaterally reflects White House frustration at the refusal of Russia and China to support tough economic sanctions against Tehran in the UN security council.

The Russian president, Vladimir Putin, underscored the divisions in the international community yesterday, when he criticised the sanctions move, saying it would make a negotiated settlement harder to achieve. "Why worsen the situation by threatening sanctions and bring it to a dead end?" he said. "It's not the best way to resolve the situation by running around like a madman with a razor blade in his hand."

In Tehran, the revolutionary guards' commander, General Mohammad Ali Jafari, claimed that the sanctions would have little impact: "They have applied all their efforts to reduce the efficiency of this revolutionary body. Now as always, the corps is ready to defend the ideals of the revolution more than ever before."

The sanctions package, combined with the sending of a second US carrier group to the Gulf earlier this year, is aimed primarily at containing Iran, which has been expanding its influence in the region since the 2003 invasion of Iraq. They are also intended to force Tehran to stop its alleged attempt to develop a nuclear bomb and end its alleged supply of weapons to Iraqi militia groups.

Ms Rice, who has had to withstand pressure from within the Bush administration for military action, insisted she remained committed to the diplomatic route. But she added: "Unfortunately the Iranian government continues to spurn our offer of open negotiations, instead threatening peace and security by pursuing nuclear technologies that can lead to a nuclear weapon, building dangerous ballistic missiles, supporting Shia militants in Iraq and terrorists in Iraq, Afghanistan, Lebanon and the Palestinian territories, and denying the existence of a fellow member of the United Nations, threatening to wipe Israel off the map."

President George Bush has said repeatedly that a military strike is an option. As part of a multi-billion-dollar request for more military spending earlier this week, the Pentagon asked for $88m to develop the Massive Ordnance Penetrator, a huge bunker-busting bomb, for its Stealth bombers.

The Bush administration said the bomb was needed "in response to an urgent operational need for theatre commanders".

Democratic members of Congress questioned whether the weapon was intended for use against Iran, whose nuclear facilities are largely hidden underground.

Jim Moran, a Democratic member of the House of Representatives' defence spending committee, said: "My assumption is that it is Iran, because you wouldn't use them in Iraq, and I don't know where you would use them in Afghanistan, it doesn't have any weapons facilities underground that we know of."

The immediate impact of the sanctions announcement will be felt in the boardrooms of banks and companies in Britain and elsewhere in Europe. Any business continuing to trade with Iran risks US reprisals.

The sanctions make it illegal for any US citizen to knowingly provide material support or resources to the Quds division. As the US has had few links with Iran since 1979, this is mainly academic. The impact will be felt by non-American companies that have business interests in both the US and Iran.

The US treasury secretary, Henry Paulson, who accompanied Ms Rice at the press conference, said, "It is increasingly likely that if you are doing business with Iran, you are doing business [with the Iranian revolutionary guard corps]. It's simply not worth the risk."

The British and other European governments are discussing whether also to designate the Quds division a terrorist organisation, though the legal definition and the process of designating groups as terrorist is different from that in the US.