The White House's national security adviser, John Bolton, said the Trump administration wouldn't renew a bar on litigation which has been in place for two decades.
The decision is a blow to Havana's efforts to draw foreign investment to the island.
The decision gives Americans the right to sue companies that operate out of hotels, tobacco factories, distilleries and other properties Cuba nationalized after Fidel Castro took power. It allows lawsuits by Cubans who became US citizens years after their properties were taken.
Bolton also announced that the US would restrict some travel to Cuba not related to family visits to help steer US dollars away from the Cuban government, its military or its security services.
The announcement drew sharp criticism from Spain, the EU and Canada.
The Spanish government said Washington's move damaged relations between Europe and the United States and would lead to lawsuits and counter-claims.
Spanish companies are among Cuba's main foreign investors.
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