The Obama administration is freezing assets held by Libyan leader Moammar Gadhafi and four of his children in the United States.
The Treasury Department says the sanctions against Gadhafi, three of his sons and a daughter also apply to the Libyan government.
The action was taken under an executive order signed Friday by President Barack Obama.
Obama says the U.S. is imposing unilateral sanctions on Libya because continued violence there poses an "unusual and extraordinary threat" to America's national security and foreign policy.
The president acted after hundreds of Americans were safely evacuated from Libya following days of bloodshed across the country. Militias loyal to Gadhafi have been firing on protesters who have been demanding the Libyan leader's ouster.
The United States has also shuttered its embassy in Libya. The move on Friday ended days of cautious condemnation by all but calling for the unpredictable leader's immediate ouster.
Gadhafi's legitimacy has been "reduced to zero," the White House said as it announced the steps.
The sharper U.S. tone and pledges of tough action came after American diplomatic personnel were evacuated from the capital of Tripoli aboard a chartered ferry and a chartered airplane, escorting them away from the violence to Malta and Turkey. As they left, fighting raged on in Tripoli and elsewhere in Libya as Gadhafi vowed to crush the rebellion that now controls large parts of the country.
With U.S. diplomats and others out of harm's way, the administration moved swiftly. Shortly after the chartered plane left Libyan airspace, White House spokesman Jay Carney said the U.S. had been constrained in moving against Gadhafi and his loyalists due to concerns over the safety of Americans but was now ready to bring more pressure on the government to halt its attacks on opponents.
"It's clear that Colonel Gadhafi has lost the confidence of his people," Carney told reporters. "He is overseeing the brutal treatment of his people, the fatal violence against his own people, and his legitimacy has been reduced to zero in the eyes of his people."
The White House was finalizing a presidential executive order that would name Gadhafi and his family, impose travel bans and freeze assets, according to an administration official familiar with the document who spoke on condition of anonymity because it had not yet been made public. Part of the goal of such efforts is to encourage Gadhafi loyalists to defect.
Carney said sanctions would "make it clear that the regime has to stop its abuses, it has to stop the bloodshed." International officials say thousands may be dead.
Gadhafi, 68, has had a rocky relationship with the West, and American officials are worried about his unpredictability as he desperately seeks to maintain his four-decade grip on power.
U.S. military action is considered unlikely, although the Obama administration has not ruled out participation in an internationally administered, protective no-fly zone.
Carney said some sanctions would be unilateral, and others would be co-ordinated with international allies and the United Nations, whose secretary-general, Ban Ki-moon, was invited to Washington for Monday talks with President Barack Obama.
Carney cited UN negotiations on a possible weapons embargo, but declined to lay out the independent steps the U.S. would take.
The U.S. Treasury Department had already ordered American banks to scrutinize accounts linked to senior Libyan officials and inform authorities of any attempts to misappropriate or divert public funds.