Sgt Bowe Bergdahl, 26, disappeared in eastern Afghanistan in June 2009, and is believed to be held by the Haqqani network, a subsidiary of the Taliban, in Pakistan's North-West Frontier tribal area.
Five videos of the soldier, who is the only US serviceman held captive in the region, have been released over the past three years. In the most recent, he said: "Every day I want to go home, the pain in my heart to see my family again doesn't get any smaller."
A senior Haqqani commander told the Reuters news agency: "Until now we treated him very well, but this move by the United States will of course create hardships for him." Commanders also claimed the blacklisting meant the US was "not serious" about peace efforts in Afghanistan.
The Haqqanis are considered one of the deadliest threats to international troops in Afghanistan, launching attacks from their Pakistan bases. The US move, which had been the subject of intense debate within the Obama administration, is also certain to raise tensions between Washington and Pakistan.
According to the US State Department, Hillary Clinton, the secretary of state, signed a report to Congress saying that the tribal group met the criteria to be designated a foreign terrorist organisation, a step that will lead to sanctions against it.
An administration official said: "This shows that we are using everything we can to put the squeeze on these guys."
The group's leader, Jalaluddin Haqqani, was once a prized asset of the CIA, receiving cash and weapons in the 1980s to fight Soviet forces. But after the September 11 attacks on America he forged close links with al-Qaeda and began fighting US troops.
In recent years the US has heaped pressure on Pakistan to launch a military offensive against Haqqani strongholds in North Waziristan. It has taken on an added urgency in the past year after the Haqqani network was blamed for a series of high-profile attacks, including a bombing that wounded 77 US troops in Wardak province, Afghanistan, and commando raids on two hotels in Kabul.
Pakistani military officers have repeatedly promised to act but only when their forces are freed from campaigns elsewhere in the border region.
Yesterday Pakistani officials expressed shock at the US decision and said it had come without warning. A senior security official said the move could destroy relations between the two countries.
"If they declare them to be terrorists and say they are based in Pakistan, and are being supported by the ISI [Inter-Services Intelligence] and the army, that automatically makes Pakistan a state-sponsor of terrorism, and the entire world will cut relations turning Pakistan into a pariah."
The move has been welcomed by the Afghan government, which has long called for tougher international action. Sediq Sediqqi, a spokesman, said: "This will be a major step by the United States against the Haqqani network who are still plotting for dangerous and destructive attacks against us."
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