Resolution, drafted by Uganda, accuses Asmara of supplying Islamist rebels with money and arms as they fight to topple a fragile U.N.-backed transitional government in Somalia.
The U.N. Security Council has placed sanctions on Eritrea for aiding Somali rebels and refusing to resolve a border dispute with neighboring Djibouti.
The 15-member Security Council voted 13 to 1 - with China abstaining - to ban weapons sales to and from Eritrea. The sanctions also impose travel restrictions and freeze the assets of some members of the country's leadership.
The resolution, drafted by Uganda, accuses Asmara of supplying Islamist rebels with money and arms as they fight to topple a fragile U.N.-backed transitional government in Somalia.
The resolution demands Eritrea "cease arming, training, and equipping armed groups" blamed for violence in Somalia and for inflaming tensions on the border with Djibouti.
Somalia's representative to the United Nations said the sanctions will be a positive step toward stabilizing the Horn of Africa.
"Eritrea has given refuge and safe haven to known terrorists," he said. "Rebels, spoilers and violators of human rights whose purpose all along was to destabilize Somalia. These same groups have committed crimes against humanity and crimes against the Somali people."
Eritrea has called the allegations a fabrication led by Washington. In a letter to the Security Council this month, Asmara said the measure risks engulfing the region into another cycle of conflict. It also said it might encourage regional rival Ethiopia to "contemplate reckless military adventures."
U.S. Ambassador to the U.N. Susan Rice says Washington saw the sanctions, originally sought by the African Union, as a last resort.
"We do not see this as the door closing on Eritrea," she said. "On the contrary, another opportunity for Eritrea to play a more responsible and constructive role in the region. We did not come to this decision with any joy or with anything other desire to support the stability and peace in the region."
The only Security Council member to vote against the sanctions was Libya. That country's representative called the sanctions ill-targeted.
"Libya believes the resolution we have just adopted has an unrealistic point of view and is too hasty," he said. "Sanctions are not the ideal way of resolving the current problem. Humanitarian effects will exacerbate the solution further in the Horn of Africa and we believe this creates an obstacle to the peaceful solutions to which we all aspire."
The resolution also demands Eritrea withdraw its troops from disputed territories along its frontier with Djibouti and engage in efforts leading to a mutually acceptable settlement there.