Two Iranians were charged over the plot which US officials said implicated Iran's Revolutionary Guard Corps. Meanwhile the US issued a worldwide alert about possible anti-US actions.
"The US government assesses that this Iranian-backed plan to assassinate the Saudi ambassador may indicate a more aggressive focus by the Iranian government on terrorist activity against diplomats from certain countries, to include possible attacks in the United States," the alert said.
It urged Americans residing and travelling abroad to review the information available when making travel plans. Iran has dismissed the allegations as false and baseless.
Hillary Clinton, Secretary of State, praised those involved in the operation to uncover the plot. "It was a terrific achievement by our law enforcement and intelligence communities, and we will be consulting with our friends and partners around the world about how we can send a very strong message that this kind of action, which violates international norms, must be ended," she said at a news conference.
"This case will, I think, reinforce the well-grounded suspicions of many countries about what they're up to." Mrs Clinton said the suspected plotters had been trying to involve hired killers from Mexican drug cartels.
"The idea that they would attempt to go to a Mexican drug cartel to solicit murder-for-hire to kill the Saudi ambassador, nobody could make that up, right?" she said.
US Attorney General Eric Holder said Iran's involvement in the plot was "a flagrant violation of US and international law". Hillary Clinton said Washington was preparing new penalties against Iran, which is already subject to a variety of international sanctions. US officials have said military action was not being considered.
The US Treasury Department placed five Iranians, including the two men charged, under sanctions on Tuesday for their alleged involvement in the plot. The two accused were named as Manssor Arbabsiar, a 56-year-old naturalised US citizen with dual Iranian and US passports, and Gholam Shakuri, based in Iran and said to be a member of Iran's Quds Force, a unit of the Revolutionary Guard Corps.
The other three were described as high-ranking members of the Quds force.
There is a long history of animosity between Iran and Saudi Arabia which stretches back to before the Islamic Revolution of 1979.
Religiously, the Wahhabi rulers of Saudi Arabia and the Shia clerics of Iran reject each other's interpretation of Islam.
Geopolitically, the two are staunch rivals, engaged in a seemingly never-ending battle for greater regional influence.
They have also been engaged in proxy wars for decades, taking different sides in the Iran-Iraq war, Afghanistan, Lebanon and the Palestinian territories.
But it is the Saudis' military intervention in Bahrain which may have prompted the alleged plot. It was little criticized in the West but was seen in Iran as a blatant assault on the Shia majority in Bahrain.
Geopolitically, the two are staunch rivals, engaged in a seemingly never-ending battle for greater regional influence.
They have also been engaged in proxy wars for decades, taking different sides in the Iran-Iraq war, Afghanistan, Lebanon and the Palestinian territories.
But it is the Saudis' military intervention in Bahrain which may have prompted the alleged plot. It was little criticized in the West but was seen in Iran as a blatant assault on the Shia majority in Bahrain.
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