Hydraulic fracturing, or fracking, will be banned in New York state, governor Andrew Cuomo's administration announced.
A report has concluded that the method of extracting oil and gas potentially poses health risks.
"Relying on the limited data presently available would be negligent on my part," said state Health Commissioner Howard Zucker.
Vermont is the only other US state to ban fracking.
New York has had a moratorium on hydraulic fracturing since 2008 when it initiated an environmental review of the process.
The potential for fracking in the state is considerable as the large Marcellus shale deposit is partly located under it.
Commissioner Zucker said he had identified ``significant public health risks'' that prevented him approving the technique.
Environmental groups welcomed the decision.
But representatives of the oil and gas industry criticised the move, suggesting the state would miss out on the creation of thousands of jobs and hundreds of millions of dollars of revenue.
New York Governor Andrew Cuomo said it was the most emotionally charged issue he had dealt with, even compared to gay marriage or the death penalty.