The 39-year-old, who used to rap in Berlin and now goes by the name Abu Talha al-Almani, is one of the most famous Western fighters for IS. He is already listed as an al Qaeda supporter by the United Nations.
The US listing as a "global terrorist" freezes all of Cuspert's assets under US control and prohibits transactions with him.
Cuspert joined IS in 2012 and has appeared in numerous videos from the group, including one in November "in which he appears holding a severed head he claims belongs to a man executed for opposing ISIL (IS)," the State Department said.
The rise of foreign fighters in the ranks of IS has alarmed many Western nations.
"Cuspert is emblematic of the type of foreign recruit ISIL seeks for its ranks -- individuals who have engaged in criminal activity in their home countries who then travel to Iraq and Syria to commit far worse crimes against the people of those countries," the State Department said.
Cuspert has pledged an oath of loyalty to IS leader Abu Bakr al-Baghdadi and is a chief recruiter of German fighters.
German prosecutors have launched an investigation into Cuspert as well as other foreign fighters.
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