The Bush administration has blacklisted one of Iran's biggest banks, alleging that it is used to transfer money to terrorist organisations.
Mr Levey accused Saderat Bank of moving terrorist funds
The Treasury Department said it had cut state-owned Bank Saderat off from the US financial system entirely.
The bank, although unable to deal directly in the US, was previously able to make transactions via a bank in another country.
The US is calling for UN sanctions on Iran over its nuclear programme.
There has been no official reaction to the news from either Bank Saderat or Iran.
Stuart Levey, the Treasury's under-secretary for terrorism and financial intelligence, announced the action against Saderat during a speech to the American Enterprise Institute.
He said the bank had been blacklisted because "this bank, which has approximately 3,400 branch offices, is used by the government of Iran to transfer money to terrorist organisations."
"We will no longer allow a bank like Saderat to do business in the American financial system, even indirectly," he added.
According to Mr Levy, the bank had facilitated the transfer of hundreds of millions of dollars to the Lebanese militant group, Hezbollah, and what he called other terrorist organisations, every year.
Correspondents say the bank has played a major role connecting Iranian businesses with the outside world over the last few years.