U.S. officials say Washington has given Eritrea 90 days to close its consulate in the western state of California.
The U.S. officials said on the condition of anonymity that the action was taken in response to the restrictions placed on the U.S. embassy in Eritrea.
An Eritrean government official dismissed the allegations saying it was part of an "unfriendly policy" towards Eritrea.
U.S.-Eritrean relations have declined in recent months as Eritrea increasingly blames Washington for the impasse in its border dispute with Ethiopia.
The U.S. embassy in Asmara suspended its visa services in January, saying Eritrea had interrupted the delivery of diplomatic pouches.
Human rights groups have criticized Eritrea for curtailing religious and media freedom and imprisoning political opponents.
Some information for this report was provided by AFP and Reuters.
