Four of the littoral countries to the Mekong River -- Thailand, Cambodia, Vietnam and Laos -- last week delayed a decision to forward with the project.
Opponents said the dam would threaten fish habitat and wetlands and possibly displace millions of people.
The U.S. State Department in a statement said it recognizes that projects like Xayaburi have the potential to stimulate the economy while also protecting against floods and droughts.
"At the same time, our own experience has made us acutely aware of the economic, social and environmental impacts that large infrastructure can have over the long-term," the statement read.
The note adds that there are nearly a dozen dams proposed along the main artery in the river and more than 70 tributary dams. Decisions on the projects "should be taken deliberatively, informed by the best science and consultation with all stakeholders," the State Department said.
The World Wildlife Fund, in a study published last week, said the same amount of electricity could be generated, with less environmental impact, from smaller dams on tributaries of the Mekong.