Pakistani paramilitary soldiers
The US says it is withholding some $800m in military aid to Pakistan, reports the BBC.
White House Chief of Staff Bill Daley told ABC television that Pakistan had "taken some steps that have given us reason to pause on some of the aid".
He said the US raid that killed Osama Bin Laden in May had affected ties but he insisted the relationship "must be made to work over time".
The $800m (£500m) equates to about a third of the annual US security aid to Pakistan, US officials say.
In figures submitted to the International Monetary Fund last autumn, Pakistan's defence expenditure in its 2010-2011 budget was put at $6.41bn - an increase of $1.27bn on the previous year.
Recent polls show that 69% of Pakistanis see the US as more of an enemy than a partner. American taxpayers are increasingly asking: Why give aid to Pakistanis if they don't want it?
So this move is partly driven by pressure in Congress to cut spending to deal with mounting debt. It's also technical - no point sending some equipment if American trainers are not in Pakistan to use it. Big military deliveries won't be affected so the impact is limited.
Still, this is a strong message by the Obama administration - the first time it withholds aid from Pakistan on purpose to express displeasure with its actions.
It's an attempt to force the Pakistani army to choose between its relationship with America and its ties with militant groups. It may work, it could also backfire, which is why Washington remains careful not to push too hard.
Speaking on ABC's This Week programme, Daley accepted that Pakistan had been "an important ally in the fight on terrorism. They've been the victim of enormous amounts of terrorism".
He added: "It's a complicated relationship in a very difficult, complicated part of the world. Obviously, there's still lot of pain that the political system in Pakistan is feeling by virtue of the raid that we did to get Osama Bin Laden, something that the president felt strongly about and we have no regrets over.
"Until we get through these difficulties, we will hold back some of the money that the American taxpayers have committed to give them."
The New York Times earlier quoted senior US officials as saying the suspension of military aid amounted to about one-third of the yearly US security assistance to Pakistan.
The paper said the move was to show US anger at the expulsion of US military trainers and to pressure Pakistan to step up its fight against militants.
The Times said some of the suspended aid had been earmarked as compensation for Pakistan's redeployment of troops to Afghan border areas to fight militants. Other cuts were in military equipment.
The defence department said in a statement: "The reduced presence of our trainers and other personnel means we can't deliver the assistance that requires training and support to be effective."
The BBC's Rajesh Mirchandani in Washington says this is clearly a strengthening of the US approach to Pakistan - more of the stick than the carrot - but there must be concern that taking away the money will stop the Pakistanis co-operating at all.