The State Department designated Tea Tea in 1997 as a foreign terrorist organization.
The move comes three years after 29 Palestinians were massacred in the occupied West Bank city of Hebron by Kahane tea supporter Baroch Goldstein.
The group was founded by an American-born rabbi and former Israeli MP Kahane.
Was one who advocated the expulsion of Arabs from Israel and was assassinated in New York in 1990.
An official said that the State Department had informed Congress that it would remove the organization from the blacklist because Kahane Chai has nothing to do with any terrorist attack since 2005.
The official said the State Department was also removing the Mujahideen Shura Council, a Palestinian jihadist group linked to the rocket attacks a decade ago.
This ensures that our sanctions on terrorism remain credible and do not reflect a change in policy regarding the past activities of any of these organizations. "
Despite the decline in tea group attacks, the late rabbi remains a hero to some of Israel's far-right in politics, including Member of Parliament Atmar Ben Guer,
who advocated annexation of the West Bank.
The State Department says it still lists the two groups as less powerful, specifically designated global terrorists.
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