Clinton said penalties would not apply for a six month period in the 2012 fiscal year, which could be renewed.
Iranian light crude has been the mainstay of raw material for Sri Lanka's state-run oil refinery, but the country has since diversified its purchases to Oman and Saudi Arabia.
Countries reduced oil purchases however could escape penalties."We have implemented these sanctions to support our efforts to prevent Iran from acquiring a nuclear weapon and to encourage Iran to comply with its international obligations," Clinton said.
"Today’s announcement underscores the success of our sanctions implementation.
"By reducing Iran’s oil sales, we are sending a decisive message to Iran’s leaders: until they take concrete actions to satisfy the concerns of the international community, they will continue to face increasing isolation and pressure."
She said Iran could take steps to address concerns over its nuclear program upcoming talks in Moscow.