In a televised address, John Kerry said that the Islamist group was committing acts of genocide against believers as well as Shia Muslims and Yazidis, an ethno-religious group.
Mr Kerry said: "Daesh is genocidal by self-proclamation, by ideology and by actions, in what it says, what it believes and what it does.
"Daesh is also responsible for crimes against humanity against these same groups."
John Kerry's declaration does not force the United States to act militarily against Islamic State, nor does it impose legal guilt, but it will add pressure on President Barack Obama and other world nations - such as Britain - to take stronger action against the terrorist group.
It comes after the House of Representatives passed a nonbinding resolution condemning IS atrocities as genocide earlier this week. Every member voted in favour of the resolution.
The US is currently leading a bombing campaign against Islamic State in Syria along with other nations including Britain.
According to the 1948 UN Convention, a group is committing genocide against another if there are: "acts committed with intent to destroy, in whole or in part, a national, ethnic, racial or religious group."
Islamic State has repeatedly murdered, kidnapped, raped, sold into slavery and driven minorities from their homes, and has destroyed churches and other Christian artefacts.
Today's announcement marks only the second time a US administration has declared that a genocide was being committed during an ongoing conflict.
The first was in 2004, when then-secretary of state Colin Powell determined that atrocities in Sudan's Darfur region constituted genocide.
General Bishop of the Coptic Orthodox Church in the UK Bishop Angaelos told Premier he was "very, very happy" about the announcement.
He said: "The details will follow I'm sure, a plan of action will follow and I think we need to look out for that.
"But today should be a day of thanksgiving and a day of recognition of all those who have tired so relentlessly in this issue and to really give thanks to God and to everyone who has made such an effort for this to come about."
