The US has extended targeted sanctions against Burma for another year but lifted a visa ban on officials.
The State Department said the move both rewarded progress and aimed to prevent backsliding on reform.
It cited human rights concerns and the continued detention of political prisoners as factors in extending the annual sanctions order.
Last month the European Union lifted the last of its non-military sanctions on Burma.
The US has already lifted most trade and investment sanctions against Burma amid a series of reforms in the South East Asian nation.
The State Department said the latest moves both acknowledged the important changes that had been made in Burma and the challenges that remained.
Extending the sanctions order would "maintain the flexibility necessary to target specific bad actors and prevent backsliding on reform", a department official said in a briefing.
It would allow for targeted restrictions against doing business with companies or individuals who "slow or thwart reform in Burma, commit serious human rights abuses or propagate military trade with North Korea" .
But a 1996 visa blanket ban that targeted officials from the former military regime and their families was terminated, the State Department said.
Since being elected in November 2010, the civilian administration of President Thein Sein has freed many political prisoners and relaxed censorship.
It has begun to work with the Aung San Suu Kyi-led opposition, which now has a small presence in parliament after by-elections deemed free and fair.
But controlling anti-Muslim violence that has erupted in a number of places has proved a challenge for the government. Fighting has also taken place in the north of the country with Kachin rebels and a number of political prisoners remain in jail.
Earlier this week, more anti-Muslim violence erupted north of Rangoon, leaving one person dead and dozens of houses razed. It followed violence in April in the centre of the country that left more than 40 people dead.
The recent clashes follow more widespread unrest between Buddhists and mostly Rohingya Muslims last year in Rakhine state, where two outbreaks of violence left about 200 people dead and up to 100,000 people - mostly Muslims - displaced.
In Indonesia, security was tightened around the Burmese embassy and ambassador's house in Jakarta after two men suspected of plotting a bomb attack were arrested.
Boy Rafli Amar, Indonesia's police spokesman, said that for the time being police still were not sure whether the embassy was indeed the target and were still investigating.
Five pipe bombs and explosive materials were found at the suspects' rented house, police said.
Many Indonesians have expressed sympathy for Burma's Rohingya Muslims, some of whom have found their way to Indonesia, living in detention centres until the government decides what to do with them, reports the BBC's Karishma Vaswani from Jakarta.
A rally on the issue was due to take place outside the embassy on Friday.