The State Department says Denis Cuspert joined the militants in 2012, appearing in numerous propaganda videos. In one from November, the 39-year-old from Berlin holds the head of a man he claimed was executed for opposing the group.
Designating a European citizen as a "global terrorist" is rare. Monday's announcement coincided with German Chancellor Angela Merkel's visit to Washington.
The action bans Americans from doing business with Cuspert and blocks any US assets he has. The United Nations put him on its global blacklist.