Labelling the guards as a terrorist organisation will allow the U.S. to impose further sanctions - particularly affecting the business sector, given the IRGC's involvement in Iran's economy.
It will also complicate diplomacy.
Critics have warned that the move could open USA military and intelligence officials to similar actions by unfriendly governments.
The new designation of the IRGC would allow the U.S.to act against companies and individuals who do business with the IRGC.
A senior Trump administration official said the new measure would criminalize contact with the Guards and "enable our prosecutors to bring charges to those that bring material support to the IRGC".
It controls the country's ballistic missiles and nuclear programmes, answers directly to Supreme Leader Ayatollah Ali Khamenei and owns a vast network of businesses ranging from oil and gas projects to construction and telecommunication.
Iranian MP Heshmatollah Falahatpisheh, the head of their national security committee, says that Iran would respond to the move by putting the USA military on the Iranian government's own "blacklist" of terror groups, right next to ISIS.
"If (the Americans) make such a stupid move, the U.S. Army and American security forces stationed in West Asia [Middle East] will lose their current status of ease and serenity", Jafari said, according to the semi-official FARS News Agency.
It concluded by holding the U.S. regime responsible for the 'dangerous consequences of their adventurous move'.
"IRGC Qods Force activity has been uncovered and disrupted in Germany, Bosnia, Bulgaria, Kenya, Bahrain, Turkey, and others", the White Hosue disclosed in announcing the designation.
Reaction from those who favour tougher engagement with Iran was quick and welcoming.
Despite the risks, Iran hard-liners on Capitol Hill, such as Republican senators Ted Cruz (Texas) and Tom Cotton (Arkansas), and elsewhere have long advocated for the designation.
"This designation ends the façade that the IRGC is part of a normal military", Mr. McCaul said in a statement.
Mr Pompeo told reporters yesterday the U.S. would continue to sanction and pressure Iran to "behave like a normal nation" and urged America's allies to take similar action.
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