WASHINGTON--President Barack Obama signed legislation Friday that effectively bans Iran from sending as its ambassador to the United Nations a diplomat with ties to the 1979 hostage crisis at the American embassy in Tehran.

The bill, which Congress passed last week, was targeted at Iran's selection of Hamid Aboutalebi as its U.N. envoy, but urges the White House more broadly to deny a visa to any representative who "has been found to have been engaged in espionage or terrorist activity directed against the United States or its allies, and if that individual may pose a threat to United States national security interest."

The White House had already said it would deny Mr. Aboutalebi a visa. His selection by Iran has become a growing issue as the U.S. tries to reach a diplomatic deal with Iran over its nuclear program.

Mr. Obama issued a statement in signing the law, saying while he agreed with Congress' concerns that "individuals who have engaged in such activity may use the cover of diplomacy to gain access to our nation," the legislation wouldn't trump presidential authority on accepting or rejecting ambassadors to the U.N., which is based in New York.

Mr. Aboutalebi, an experienced diplomat, has downplayed his role in the hostage crisis. It is rare for the U.S. to deny a visa to a U.N. ambassador.

Bernadette Meehan, a spokeswoman for the National Security Council, said Mr. Aboutalebi's links to the hostage crisis made him a "wholly inappropriate" choice.

"The selection of an individual who admits to playing a role in the takeover of our embassy to be the permanent representative to the United Nations is a profoundly inappropriate choice," Ms. Meehan said. "The events of 1979 remain a matter of deep concern to the American people."

Write to Carol E. Lee at carol.lee@wsj.com

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