The Trump administration says the phased withdrawal is linked to policy disputes with Pretoria, which rejects the allegations and says it is pursuing greater self-reliance.
The United States has decided to withdraw all funding for South Africa's HIV and AIDS response through the President's Emergency Plan for AIDS Relief (PEPFAR), a programme that has contributed about $400m (€340m) a year to the country's fight against the disease.
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The move comes as relations between Washington and Pretoria continue to deteriorate.
The head of the United Nations HIV agency, Winnie Byanyima, warned that the decision could have serious consequences for public health in South Africa, which has the world's largest HIV-positive population with more than eight million people living with the virus.
Speaking ahead of a UN meeting, she said: "Please do not take money away because you are taking lives away."
Byanyima said the loss of US funding risks undoing years of progress in preventing new infections and supporting vulnerable communities. According to UNAIDS, PEPFAR has been providing around 17% of South Africa's total HIV response funding.
She said: "Taking it away is taking life-saving support from the most vulnerable people."
South Africa does not depend on US funding to buy antiretroviral medicines, as those are financed by the government. However, American support has been crucial for prevention programmes, testing services, community outreach and assistance for groups most at risk of contracting HIV.
The US State Department said the funding withdrawal is part of a "phased drawdown" linked to what it described as South Africa's "failure to make demonstrable progress on policy requests by the administration". US officials have also said the decision was influenced by concerns over the treatment of the country's white Afrikaner minority.
The South African government has rejected those allegations. Pretoria says its Black Economic Empowerment policies are designed to address deep inequalities that persist from the apartheid era. It has also dismissed claims by US President Donald Trump that a "white genocide" is taking place in the country, saying there is no evidence to support the accusation.
South Africa's health ministry said it had not been formally informed of the funding decision but added that it had "long been working on a self-reliance plan". Officials maintain that the country is prepared to assume greater responsibility for financing its HIV response, although experts warn that replacing lost prevention funding will be difficult.