A State Department spokesperson admitted that there was a longstanding issue of oil being illegally transported to Turkey from wells in what is now IS territory.
Russia says it has proof Turkey involved in Islamic State oil trade
But he said the tanker trucks are operated by private smugglers, not directly by the IS group, and Turkey is working with its NATO allies to seal its border.
"We reject, outright, the premise that the Turkish government is in league with ISIL to smuggle oil across its borders," spokesperson Mark Toner said.
"And we frankly see no evidence, none, to support such an accusation."
Toner said Turkey had begun steps to seal an exposed section of its frontier with an IS-controlled region of Syria through which much of the trade passes.
"It's a decades-old practice, frankly that predates ISIL, of illicit trade in this region," he said.
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"What we have seen is that ISIL relinquishes ownership and sells its oil at the wellhead in Syria and Iraq and that oil is sold to smugglers, middlemen, truckers."
Toner said some of the oil sold by the IS group is bought by the regime of Syrian President Bashar al Assad, an ally of Russia, and some is smuggled out of the country.
"We work very closely with the Turks, we've been in dialogue with them. We're their NATO ally and a trusted partner," he said.
Earlier, Russia had upped the ante in a war of words with Ankara that began last week when Turkish jets shot down a Russian warplane on the Syrian border.
The Russian defense ministry accused Turkish President Recep Tayyip Erdogan and his family of directly profiting from the illegal trade in IS oil.
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