Secretary of State Hillary Rodham Clinton said the thwarted plot would further isolate Tehran.
Two people, including a member of Iran's special operations unit known as the Quds Force, were charged in New York federal court. Justice Department officials say they were working with a person they thought was an associate of a Mexican drug cartel to target the Saudi diplomat, Adel Al-Jubeir. But their contact was an informant for the Drug Enforcement Agency who told U.S. authorities about all their planning.
FBI Director Robert Mueller said many lives could have been lost in the plot to kill the ambassador with bombs in the U.S. But Preet Bharara, the U.S. attorney in Manhattan, said no explosives were actually placed and no one was in any danger because of the informant's cooperation with authorities.
Attorney General Eric Holder said the U.S. would hold Iran accountable. Clinton told The Associated Press the Treasury Department soon would put more people under sanctions. She also predicted the plot would further isolate Iran.
Holder said the bomb plot was a flagrant violation of U.S. and international law.
"We will not let other countries use our soil as their battleground," Bharara said at a press conference in Washington with Holder and FBI Director Robert Mueller.
Alizreza Miryusefi, the press attache at Iran's mission to the United Nations, said Tuesday that the accusation was "totally baseless" and that a full statement would be issued shortly.
Manssor Arbabsiar, a 56-year-old U.S. citizen who also holds an Iranian passport, was charged along with Gholam Shakuri, whom authorities said was a Quds Force member and is still at large in Iran.
Justice Department officials say Arbabsiar approached the DEA informant in Mexico to ask about his knowledge of explosives for a plot to blow up the Saudi embassy in Washington. But through subsequent conversations in English, secretly recorded for U.S. authorities, Arbabsiar offered $1.5 million for the death of the ambassador, perhaps at a purported favorite restaurant of his despite the possibility of mass casualties.
Asked whether the plot was blessed by the top echelons of the Iranian government, Holder said the Justice Department was not making that accusation.
Arbabsiar did not know he was trying to hire a DEA informant to carry out the plot, prosecutors said. Posing as an associate of a Mexican drug cartel, the informant met with Arbabsiar several times in Mexico, authorities said. The price tag was $1.5 million and Arabsiar made a $100,000 down payment wired from an overseas account.
Arbabsiar was arrested Sept. 29 at New York's John F. Kennedy International Airport. He was scheduled to appear in federal court Tuesday. Prosecutors said he faces up to life in prison if convicted.
Prosecutors said Arbabsiar has confessed to his participation in the murder plot.
President Barack Obama was first briefed on the plot in June, said White House spokesman Tommy Vietor.
"The disruption of this plot is a significant achievement by our intelligence and law enforcement agencies, and the president is enormously grateful for their exceptional work in this instance and countless others," Vietor said.