The United States House of Representatives has voted to halve contributions to the United Nations unless it introduces radical changes.
The US bill reflects dissatisfaction with the slow pace of UN reform
Support for expanded and future peacekeeping missions might be refused if a list of demands are not met.
The bill needs the approval of the Senate and must be signed into law by US President George W Bush.
UN Secretary-General Kofi Annan has said it could jeopardize the outcome of a crucial UN summit in September.
The legislation was tabled by Republican representative Henry Hyde.
"We have had enough waivers, enough resolutions, enough statements," Mr Hyde said.
"It's time we had some teeth in the reform."
The 221-184 vote was reportedly prompted by widespread disappointment with the slow pace of UN reform as well as the corruption scandal surrounding the oil-for-food programme.
The programme is believed to have allowed former Iraqi dictator Saddam Hussein to make up to $10bn (£5.46bn) in illicit revenue.
The bill requires the UN to implement 46 reforms, including cost cuts and the introduction of an independent watchdog to investigate allegations of wrongdoing.
It also calls for UN members who commit crimes against humanity to lose their membership and face embargoes.
But Mr Annan warned the plan might have a serious impact on the UN's 60th general assembly, scheduled to take place in September and due to discuss crucial reform proposals the general-secretary has been working on since March.
"[Mr Annan] believes that US engagement and leadership in this process is very important, but does not feel that withholding dues is a productive route to achieving reform," said spokesman Fred Eckhard as saying.
The Bush administration, too, had warned ahead of the vote that slashing funds could hamper reform efforts.
Commentators say the bill is unlikely to be adopted.