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The Cartel de los Soles, a group that the US alleges is led by Venezuelan President Nicolás Maduro, will be declared a terrorist organization, the US State Department said.
US Secretary of State Marco Rubio issued a statement announcing that the US intends to consider the group a Foreign Terrorist Organization (FTO) as of November 24.
This means that Maduro will effectively be declared a terrorist as well, because the US alleges that he heads the Sole Cartel, an accusation that Maduro strongly denies.
This is the latest effort by the Trump administration to reduce drug trafficking and put pressure on Maduro, as the US considers whether to take military action inside the country.
A designation like FTO allows the US government to more aggressively crack down on the group and its suspected associates, making it illegal to knowingly provide support to them.
The US Treasury Department has previously imposed sanctions on the Cartel de los Soles, but the new designation as an FTO is an escalated approach that unlocks stronger powers.
Cartel de los Soles is a term used by the US to describe a suspected criminal group involved in activities such as drug trafficking and illegal mining.
Washington alleges that the Cartel de los Soles is led by the Venezuelan president and includes members of his inner circle, including from the military. The US has not publicly released evidence of Maduro's direct involvement in drug trafficking.
But characterizing Maduro as a drug trafficker is seen as a way for the US to justify possibly targeting him or those close to him personally as part of its military campaign against suspected drug trafficking.
Speculation is growing about whether the US could strike ground targets inside Venezuela as part of efforts to put pressure on Maduro.
In October, Maduro accused the US of "fabricating a new war" after ordering the USS Gerald Ford to be sent to the Caribbean.
US President Donald Trump has said he has "somewhat" decided what he will do, but has not yet announced his decision.
He told reporters Sunday evening that he had asked Rubio to discuss the situation with Congress.
He added that "we may be having some discussions" with Maduro and that "Venezuela wants to talk," but did not provide further details on when the talks might take place.
The Trump administration has pursued an aggressive approach towards Maduro, who was returned to office in January after allegations of vote rigging.
"Neither Maduro nor his cronies represent the legitimate government of Venezuela," Rubio said in his statement.
In August, the US government increased the reward for information leading to Maduro's arrest to $50m (£37.2m), claiming he was one of the "top drug traffickers".
The US has also criticized Venezuela for inadequately addressing cartel activity, which Trump blames for an influx of fentanyl into the US.
The Venezuelan government admits that some cocaine trafficking occurs in the country, but there are much larger trafficking centers in the region. Cocaine is mainly produced in Colombia, Peru and Bolivia.
Since September, the US has carried out a series of airstrikes on ships off the coast of Venezuela and Colombia.
The US has sent its largest military deployment to the Caribbean in decades and has carried out at least 21 attacks on suspected drug trafficking ships, killing at least 83 people.
The administration has previously designated cartels in other countries as terrorist groups.
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