The Magnitsky Act introduces sanctions against Russian officials suspected of human rights abuses and is named after Sergei Magnitsky, a whistle-blowing lawyer, who died in a Moscow pre-trial detention centre in 2009.
After Putin signed the adoption ban law, the US State Department called the measure “politically motivated”, saying it “deeply regrets” Russia's decision.
The Russian public has been largely supportive of the new law. Around 56% of respondents in an opinion poll conducted by the Public Opinion Foundation said they backed a ban on US nationals adopting Russian children.
Critics of the adoption ban, however, said it would keep thousands of children, especially those with disabilities, in Russia's orphanage system.
Figures from the US State Department show that more than 60,000 Russian children were adopted by American families in the last 20 years, including 962 last year.
Russian officials blame US adoptive parents for the deaths of at least 19 of those children.
The ban has halted the adoption of 46 Russian children by US families whose cases were currently being processed.
While the adoption ban is the most controversial aspect of the proposed legislation, the bill puts forward other retaliatory measures as well, such as banning alleged US abusers of Russian citizens' rights from entering Russia and freezing any assets they may have there.