Ecommerce major Amazon reacted to the move, calling it "short-sighted".
US President Donald Trump has banned Green Cards and non-immigrant visas such as H-1B till the end of 2020 in a move intended to help the US economy.
The move will impact IT firms and the technology industry in both India and the US.
Around four lakh H-1B and one lakh L-1 Indian visa-holders in the US are employed across many technology and IT firms.
The White House said the suspension of Green Cards and non-immigrant visas would help create 5.25 lakh jobs for US workers.
US-based technology giants such as Amazon, Google, Microsoft, Facebook, Apple and Intel hire a large number of staff through the H-1B visa, and have a high approval rate of 96 percent.
While the move will not affect employees with valid visas who are already in the US, it will hurt employees who have valid H-1B visas but are not currently in the US. It may also force the companies to pause recruitment of individuals who require the H-1B visa.
Google CEO Sundar Pichai expressed disappointment at the suspension of the visas.
"Immigration has contributed immensely to America's economic success, making it a global leader in tech, and also Google the company it is today,” Pichai said in a tweet.
Jessica Herrera-Flanigan, the Twitter vice-president for public policy and philanthropy, said it undermined the “greatest economic asset: its diversity".
Amazon, too, reacted to the move, calling it "short-sighted".
"Preventing high skilled professionals from entering the country and contributing to America’s economic recovery puts American’s global competitiveness at risk" the company said in a statement.
A Kotak Institutional Securities report has said that a prolonged ban of H-1B and L-1 visas will adversely impact the talent supply chain of the IT companies even if the companies boost their localisation in the US, which is more than 50 percent.
The Trump administration's move to suspend H-1B visas will hurt innovation, productivity, and job creation in the US, according to Michael Clemens, a senior fellow at the Center for Global Development and a leading migration economist said.
"H-1B visas are a major channel for the most educated and entrepreneurial people in the world to begin working and putting down roots in America," he said.
India-based software majors such as TCS, Infosys, Wipro and Cognizant, which hire several employees at their US offices through the H-1B visa, will also be adversely impacted by the ban on non-immigrant visas and green cards.Click here for our entire coverage of the H-1B visa ban