President Donald Trump has signed an executive order declaring a national emergency, barring US companies from using telecommunications equipment made by firms posing a national security risk.
The order paves the way for a ban on doing business with China's Huawei Technologies Co.
Trump's executive order invokes the International Emergency Economic Powers Act.
This gives the president the authority to regulate commerce in response to a national emergency that threatens the United States. The order directs the Commerce Department, working with other government agencies, to draw up a plan for enforcement within 150 days.
Under review for more than a year, the order aims to protect the supply chain from "foreign adversaries to the nation's information and communications technology and services supply chain," said Commerce Secretary Wilbur Ross.
"Under President Trump's leadership, Americans will be able to trust that our data and infrastructure are secure," he said.
Reuters reported on Tuesday that Trump was expected to take action on the long-awaited proposal this week. The order does not specifically name any country or company, but US officials have previously labelled Huawei a "threat".
US allies have also been actively lobbied against using Huawei network equipment in next generation 5G networks.
The executive order comes at a delicate time in relations between China and the United States as the world's two largest economies ratchet up tariffs in a battle over what US officials call China's unfair trade practices.
Washington believes equipment made by Huawei could be used by the Chinese state to spy.
Huawei, which has repeatedly denied the allegations, did not immediately comment.
In August, Trump signed a bill that barred the US government itself from using equipment from Huawei and another Chinese provider, ZTE Corp.
Federal Communications Commission Chairman Ajit Pai, who has called Huawei a threat to US security, said Wednesday that "given the threats presented by certain foreign companies’ equipment and services, this is a significant step toward securing America’s networks."