South Sudan, the world's newest country, is in its fifth year of war following a 2013 split between President Salva Kiir and his former deputy Riek Machar.
The United States has banned the export of weapons to South Sudan and has urged other nations and the UN to adopt a global arms embargo.
While the United States government does not conduct arms sales to South Sudan, the move prevents any American company or citizen from sending military equipment or services to the country's warring factions.
Appalled by ongoing violence in South Sudan, Washington on Friday restricted arms transfers to the African country where tens of thousands have died in civil war.
Some top officials close to Kiir have already been sanctioned by the United States, including the once-powerful army chief Paul Malong, who was later fired and forced into exile when he quarrelled with the president. Haley visited South Sudan in late October and met with Kiir.
While there is no US weapons trade to South Sudan, arms continue to flow into the country through neighboring states from countries in eastern Europe, according to one USA source. She also encouraged the African Union and IGAD East African group to consider sanctions against those undermining peace efforts.More news: Central Intelligence Agency chief expects Russian Federation to meddle in United States mid-term polls
Friday, the department said it hopes other nations will follow the US policy change.
In this photo taken Wednesday, Jan. 24, 2018, United Nations peacekeepers from India stand guard at their new base in Akobo town, one of the last rebel-held strongholds in South Sudan.
With the Sudanese government now fighting on two fronts, both sides are looking for resolution.
South Sudan's leaders aren't just failing their people, "they are betraying them", Ms Haley said. "We can not stand by idly as innocent civilians are murdered and raped".
South Sudan gained independence in 2011 but fell into a civil war in 2013, with tens of thousands killed and almost 4 million displaced since.