Washington "has decided it can no longer provide foreign military financing appropriated in the current fiscal year to Rwanda," said State Department spokeswoman Darby Holladay in a statement, as reported by AFP.
The M23 is a group of Congolese rebels who have seized parts of the country in an uprising which began in April.
Congo's government has accused Rwanda of supporting the rebel group, an accusation which was backed by a UN panel which probed the conflict.
The State Department said they would continue to push Rwanda's government to halt its support for the group and allow both sides in Congo to begin talks at a peaceful settlement.
The U.S. funding, which is estimated at $200,000 will be sent to other countries, the BBC reported.
"Restraint, dialogue, and respect for each other's sovereignty offer the best opportunity for Rwanda and the DRC, with the support of their partners, to resume the difficult work of bringing peace and security to the broader region," Holladay said in her statement.
Earlier this month, the U.S. congratulated Rwanda on its 50th anniversary of independence and has sought to maintain friendly ties with its government.
"On behalf of President Obama and the people of the United States, I am delighted to send best wishes to the people of Rwanda as you celebrate the 50th anniversary of your independence this July 1," Secretary of State Hillary ClintonHillary Rodham ClintonHaim Saban calls Ellison an 'anti-Semite' Farage willing to help Trump 'formally' or 'informally' A Cabinet position for Petraeus; disciplinary actions for Broadwell after affair MORE said in a statement on Rwandan National Day.
"We appreciate your contributions toward the future peace and security of countries such as Libya and Sudan. And we look forward to working with you to promote greater regional stability which is fundamental to Rwanda's security and prosperity," she added.