It should have happened years ago, "Trump said from the White House".
There is strong bipartisan support for the move in Congress, which had passed legislation in August requiring the State Department to make a determination on putting North Korea back on the list.
The designation came a week after Trump returned from a 12-day, five-nation trip to Asia in which he made containing North Korea's nuclear ambitions a centerpiece of his discussions.
North Korea said last week that it has no intention of ending its nuclear program, North Korea's Ambassador to the UN Han Tae-song.
North Korea was taken off the US list of state sponsors of terror in 2008 during nuclear negotiations with the George W. Bush administration.
Gold prices rose sharply on Friday amid an uptick in geopolitical uncertainty after North Korea ruled out negotiations with Washington on curbing its nuclear weapons programme.
"This designation will impose further sanctions and penalties on North Korea and related persons and supports our maximum pressure campaign to isolate the murderous regime".
The move also could undercut Trump's efforts to solicit greater Chinese cooperation in pressuring North Korea to halt its nuclear and ballistic missile tests, the official said.
"The Treasury Department will be announcing an additional sanction - and a large one - on North Korea", he said.
USA officials cited the killing of North Korean leader Kim Jong Un's estranged half brother in a Malaysian airport this year as an act of terrorism.
Some members of Congress had been pushing for years for North Korea to be put back on the list, but others questioned whether the reclusive regime met the criteria of actively sponsoring global terrorism. The North has not been publicly implicated in a terror attack of that scale since.
The White House has declared it will not tolerate Kim's regime testing or deploying an intercontinental ballistic missile capable of carrying a nuclear warhead to USA cities.
Such a designation carries significant sanctions against the country's ability to receive U.S. foreign assistance, puts a ban on defense exports and sales.
"We've had the North Koreans on the state sponsor of terror before..."
"Once relisted, it will be easier to drive them from global financial systems and convince other world partners to detect the channels North Korea uses to fund its nuclear development", Thae said.