The State Department also included the kingdom for the first time on a list of countries that could be subject to U.S. sanctions because of religious intolerance.
Nations in this category carry a special designation: "countries of particular concern," or CPCs.
"Freedom of religion does not exist," the State Department said, summing up the situatid in the country can face "severe repercussions" from religious police, the report said.
It also cited instances in which government-paid mosque preachers "used violent anti-Jewish and anti-Christian language in their sermons."
For the first time in the six years the State Department has been evaluating the state of religious freedom internationally, Saudi Arabia earned the CPC designation.
The administration took the action against the Saudis despite indications that they are relaxing their policies toward nonofficial religious groups.
Ambassador John Hanford, who is the State Department's top official for the office of religious freedom, praised statements by Saudi ruler Crown Prince Abdullah in support of tolerance and moderation.
Hanford also told reporters the Saudis have begun a dialogue with the Shiite minority, which historically has suffered from discrimination.
In addition, Hanford said, school textbooks have been revised to take out inflammatory statements against non-establishment religious groups.
While acknowledging these improvements, Hanford said the Saudis have not done enough to escape the CPC designation.
He said the administration has had discussions with the Saudis on religious freedom and plans more.
At the time of Secretary of State Colin Powell's last meeting with the Saudi foreign minister, six weeks ago in Jiddah, he congratulated the kingdom for successes in the war on terrorism and praised its reform efforts.
Hanford also extolled the Saudi role in promoting energy security and Middle East peace.
The CPC designation could mean sanctions for Saudi Arabia, but any such action appears to be unlikely. The Saudi Embassy declined comment on the U.S. action.
The move was welcomed by Preeta D. Bansal, head of the U.S. Commission on International Freedom, an independent group that receives government funding and offers advice to the State Department.
Bansal said the commission's stand was based not only on violations of religious freedom within Saudi Arabia's own borders "but also its propagation and export of an ideology of religious hate and intolerance throughout the world."
Alex Arriaga of Amnesty International USA said, "Sustained pressure will be required to bring about any improvement in Saudi Arabia's egregious record of religious repression."
Ali Ahmed of the pro-democracy Saudi Institute called the designation long overdue and said U.S. officials should encourage the Saudis to undertake specific reforms, such as allowing non-Muslims to worship publicly.
In Eritrea, another CPC country, the State Department report cited "severe violations of religious freedom," including arrests and closing of churches.
In Vietnam, the report said, respect for religious freedom remained poor or deteriorated for some groups.
The Myanmar government, according to the report, infiltrated meetings of religious groups and restricted efforts by Buddhist clergy to promote human rights and political freedom.
It said that in China, Protestant and Catholic and other unregistered religious groups were subjected to intimidation harassment and detention. Religious minorities in Iran suffered similar mistreatment, the report said.
North Korea was said to have "severely repressed" unauthorized religious groups in recent years. Sudan, meanwhile, treats Islam (search) as a state religion and imposes many restrictions on religious groups not associated with the ruling party, the report said.