The US has accused Saudi Arabia of severely violating religious freedom.
Saudi Arabia is a key US ally in the 'war on terror'
In an unusual public rebuke, the US State Department put its key Arab ally on a list of states causing particular concern over freedom to worship.
According to its annual report, freedom of religion in Saudi Arabia does not exist either in practice or in law.
Vietnam and Eritrea are also listed for the first time as "countries of particular concern". They join Burma, China, Iran, North Korea and Sudan.
The designation does not require the US to impose punitive measures, but it does raise the possibility of sanctions if there is no improvement in religious tolerance, analysts say.
The US report said that "freedom of religion does not exist" in Saudi Arabia, where an austere form of Sunni Islam known as Wahhabism is the official religion.
Christianity and all its symbols - including crosses and Christmas trees - are strictly banned, as are all places of worship except mosques.
The report said those groups who did not adhere to the officially sanctioned strain of Islam were facing "severe repercussions" at the hands of the religious police in the desert kingdom.
At a Washington news conference, Ambassador John Hanford, the head of the US State Department's religious freedom office, said Saudi Arabia appeared on the list despite some forward movement over the past year.
Mr Hanford mentioned official Saudi statements in support of tolerance and moderation and also said a number of text books have been modified to take out inflammatory references.
"But problems exist that push them over the line," Mr Hanford said.
The slap in the face for the Saudis mainly is symbolic but nonetheless important, says the BBC's Justin Webb in Washington.
Pressure is great on the Gulf monarchy to reform
The designation as a "country of particular concern" could in the future lead to sanctions against the Saudis, though such an outcome is highly unlikely, he says.
Much more significant is the simple fact that the Bush administration has decided to issue a formal stinging rebuke to a Middle Eastern ally.
The move appears to be an attempt to warn the Saudi royal family and other Middle Eastern rulers that America will not turn a blind eye to behaviour it regards as unacceptable, he says.
Just why the US administration is taking a tougher line towards Saudi Arabia is not entirely clear, the BBC's Middle East analyst Roger Hardy says.
But the decision comes at a time when US officials are speaking out with much greater candour - in particular about the Saudi kingdom's role in the sponsoring and financing of al-Qaeda, our analyst says.