The council blacklisted Ansar al-Sharia for its ties to Al-Qaeda, slapping an arms embargo, assets freeze and global travel ban on the extremists at the request of Britain, France and the United States.
The measure targets Ansar al-Sharia Benghazi and its sister group Ansar al-Sharia Derna, which both have links to Al-Qaeda in the Islamic Maghreb (AQIM) and other violent radical outfits.
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French Ambassador Francois Delattre said the decision would provide a boost to efforts by UN special envoy Bernardino Leon to broker a deal between Libya's many militias and the government.
"This is an important decision because it draws a clear line between, on the one hand, jihadists with whom there can be no dialogue, and on the other, those Libyan groups - Islamist and others - that must take part in talks launched by special envoy Bernardino Leon," Delattre told AFP.
Since 2012, the Benghazi wing has operated several training camps mainly to help armed groups in Iraq and Syria and to a lesser extent in Mali, according to the request filed by the three countries.
Twelve of the 24 jihadists who attacked the Algerian In Amenas gas complex in 2013 trained in the camps of Ansar al-Sharia in Benghazi, Libya's second city, documents said.
More recently, the group has conducted several attacks on Libyan security forces, it added.
Ansar al-Sharia Derna also took part in the September 2012 attack on the US mission and is operating camps in the northeastern Derna and Jebel Akhdar regions to train fighters for Iraq and Syria.
A third sister group, Ansar al-Sharia Tunisia, was added to the UN terror list in September.
French Foreign Minister Laurent Fabius told a meeting on the sidelines of the UN General Assembly in September that the group should face sanctions as part of efforts to prevent Libya from sliding further into violence.
The UN effort to broker a deal with various militias and the government on restoring order in Libya led to a 12-hour humanitarian ceasefire in Benghazi earlier yesterday.
Libyan authorities have struggled to assert control across a country awash with weapons and powerful militias after the ouster of longtime dictator Moamer Kadhafi in a 2011 revolt.
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