RNA - The State Department designation bans US citizens and residents from dealing with the group and any assets found to belong to it in areas under US jurisdiction will be frozen.
"We are disappointed with the US decision in view of the fact that Kashmir is an internationally recognized dispute with UN Security Council resolutions pending implementation for the last 70 years," Nafees Zakariya, Pakistan's foreign ministry spokesman, told reporters in the capital Islamabad.
The move was "completely unjustified," he said.
After Washington announced the decision on Wednesday, several hundred activists gathered in Muzaffarabad, capital of Pakistan-administered Kashmir, and chanted anti-US slogans.
Washington had already designated the group's leader, Syed Salahuddin, a "global terrorist," but he still operates in Pakistani Kashmir, where his group has strong support.
The designation comes the week both India and Pakistan mark 70 years of independence from the British Empire -- and the start of bitter rivalry and decades of conflict over the disputed Himalayan region of Kashmir.
Since 1989, rebel groups have fought in Indian-held Kashmir, demanding independence or a merger of the territory with Pakistan, and tens of thousands -- mostly civilians -- have been killed.
India regularly accuses Pakistan of arming militants, while Islamabad denies the allegation, saying it only provides diplomatic support to Kashmiris seeking self-determination.
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