US President Donald Trump prolonged a review period overnight to October 12 before his administration decides whether or not to permanently lift the decades-old sanctions.
His predecessor Barack Obama had eased the sanctions in January, but kept Sudan on review for six months, a period that ended on Wednesday.
Obama had made the permanent lifting of the sanctions dependent on the East African country's progress in five areas of concern at the end of the review period.
In his executive order issued on Tuesday, Trump extended the deadline, saying "more time is needed" for the review.
And on Wednesday, Bashir decided to suspend the talks between Washington and Khartoum.
Bashir "issued a presidential decree ordering the suspension of the committee that was negotiating (the lifting of the sanctions) with the United States until October 12," the official news agency SUNA said, quoting a presidential decree.
The committee has been negotiating for more than a year with US officials on lifting the American trade embargo in force against Khartoum since 1997.
A senior US administration official told reporters in Washington that the United States wanted with Sudan a "positive relationship going forward".
"The key focus, I think, for the Sudanese has been working to achieve the full revocation of the sanctions and if at the end of the three months, just a relatively short extension... the stated intent, as our statement indicates, is to lift the sanctions," he said.
Prior to Bashir's decree, Sudanese Foreign Minister Ibrahim Ghandour voiced Khartoum's disappointment over Trump's order.
"We regret such a decision that came out after long negotiations between Sudan and the United States," he said.
"The United States, Europe, Africa and the international community admit that Sudan has fulfilled its commitments when it comes to the five tracks, which is why we don't see any reason for extending the review period," he told reporters.
"But we are still hoping that the sanctions will be lifted permanently."
Top US envoy to Sudan, Steven Koutsis, had told AFP in June that barring few exceptions, Khartoum had made "positive" steps on these concerns.
The areas of concern -- or "five tracks" -- include giving more access to humanitarian workers in war zones, counterterrorism cooperation with the United States, an end to hostilities against armed groups in Sudan and halting support for insurgents in neighbouring South Sudan.
"I have decided more time is needed for this review to establish that the government of Sudan has demonstrated sufficient positive action across all of those areas," Trump's order said, noting that "the government of Sudan has made some progress".
'Smart' sanctions recommended
Washington imposed a complex set of economic sanctions on Sudan in 1997 for its alleged backing of Islamist militant groups.
Al-Qaeda leader Osama bin Laden, who was killed in a US commando raid in Pakistan in 2011, was based in Khartoum from 1992 to 1996.
Washington also justified the embargo with accusations of scorched-earth tactics by Khartoum against ethnic minority rebels in war-torn Darfur.
At least 300,000 people have been killed and 2.5 million displaced since the Darfur conflict erupted in 2003, the UN says.
Bashir is wanted by the International Criminal Court for genocide and war crimes related to the conflict, charges he steadfastly denies.
The UN said it had hoped the United States would make a "positive decision" on the sanctions against Sudan for allowing more humanitarian aid access across war zones.
But a Washington-based campaign group had called for the review period to be extended, saying Khartoum needed to do more for the embargo to be lifted.
The Enough Project said the Trump administration should now devise a new set of "smart and modernised" sanctions that would spare Sudan's people.
They should "target those who are most responsible for grand corruption and atrocities, including air strikes on villages, attacks on churches, obstruction of humanitarian aid, jailing and torturing opposition figures and civil society leaders, stealing elections, and undermining peace efforts", said John Prendergast, founding director of Enough Project.