The US is restricting economic and security assistance to Ethiopia over alleged human rights abuses during the conflict in Tigray region the US State Department said.
It will bar current or former Ethiopian or Eritrean government officials it deems responsible for the crisis.
Secretary of State Antony Blinken said in a statement the actions were to press for a resolution of the crisis.
The parties involved “have taken no meaningful steps to end hostilities or pursue a peaceful resolution of the political crisis,” he said.
Redwan Hussein, head of the Ethiopian government’s Tigray taskforce, said government would issue a statement.
Thousands were killed and about two million forced from their homes in Tigray after conflict erupted between the Tigray People’s Liberation Front (TPLF) and the Ethiopian military last November.
Troops from neighbouring Amhara and Eritrea entered to support government.
Residents say Ethiopian troops and allies killed civilians and committed gang rapes. Ethiopia put soldiers on trial for killing civilians and rape, although the court records were not yet public.
Both Eritrea and Ethiopia spent months denying Eritrean soldiers were in Tigray before acknowledging their presence and promising they would withdraw.
Blinken said the US would continue humanitarian assistance and other critical aid to Ethiopia and would carry on with existing broad restrictions on assistance to Eritrea.
The Ethiopian government is under increasing pressure from the international community to demonstrate accountability as reports of atrocities in Tigray mount. The European Union suspended budget support payments amid reports of gang rapes, mass killings of civilians and widespread looting in the northern region.
Blinken said the US called on the Ethiopian government to meet commitments to hold accountable those responsible for rights violations and abuses, to protect civilians and ensure unhindered humanitarian access.
Further US actions are possible, he said.