The al-Quds unit within the guards corps is accused of providing powerful bomb-making equipment to fighters in Iraq that has led to the deaths of US soldiers. The revolutionary guards as a whole, which have business interests ranging from newspapers to cars, were branded "proliferators of weapons of mass destruction" in reference to its alleged role in developing nuclear weapons.

Three major state-owned Iranian banks, which Washington claims help fund Tehran's alleged support for the Taliban in Afghanistan, Shia militants in Iraq, and Hamas and Hizbullah, are also targeted.

The unprecedented sanctions, which also target the country's defence ministry, will cut off more than 20 Iranian entities, including individuals and companies owned or controlled by the revolutionary guards.

The secretary of state, Condoleezza Rice, said today: "What this means is that no US citizen or a private organisation will be allowed to engage in financial transactions with these persons and entities."

"These actions will help to protect the international financial system from the illicit activities of the Iranian government. They will provide a powerful deterrent to every international bank and company that thinks of doing business with the Iranian government."

Ms Rice said the US was "fully committed to a diplomatic solution with Iran" and had "no conflict" with the Iranian people.

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 Israeli off the map."

The treasury secretary, Hank Paulson, told reporters in Washington that Iran channels millions of dollars each year to terrorists. "It is increasingly likely that if you are doing business with Iran you are doing business with [the revolutionary guards]," Mr Paulson said.

He said the measures were intended to prevent "one of the world's worst regimes from acquiring the world's most dangerous weapons".

A senior Iranian MP denounced the sanctions, which are believed to be the first ever imposed by the US against the armed forces of another state, as a "strategic mistake".

Kazem Jalali, spokesman for the Iranian parliament's foreign affairs and security commission, told AFP: "The revolutionary guards is an official force in Iran and it is clear that labelling them terrorists is interfering in the domestic affairs of a sovereign nation."

He added: "If things are seen this way then most of the US forces who are doing operations in different parts of the world and hurting innocent people are terrorists.

"This will make the wall of distrust between Iran and the United States higher every day and will close down dialogue."

Britain said it supported the US action. A Foreign Office spokesman said: "We are prepared to lead the way to a third resolution of sanctions, and at the same time support tougher European Union sanctions."