Some 50 plaintiffs, relatives of people killed or wounded in attacks in Israel and some of the victims themselves, filed the lawsuit in the Southern District of the New York court system, according to a document obtained by AFP.
The case, which was filed on Friday, is a civil action for "international terrorism, wrongful death, personal injury and related torts."
The plaintiffs quoted a 1996 US State Department report that accused Iran of sponsoring "international terrorism."
Their court summons noted that Iran and the groups it supported were subject to strict US government sanctions that made it difficult for them to move large sums of money around.
"Defendant UBS solved this problem for Iran by illegally providing Iran with hundreds of millions of dollars in cash between 1996 and 2004," said the document.
"UBS knew full well that the cash dollars it was providing to a state sponsor of terrorism such as Iran would be used to cause and facilitate terrorist attacks by Iranian-sponsored terrorist organizations such as Hamas, Hizbollah and PIJ, " the document added.
A US State Department government report released at the end of April said Iran remained the world's "most active" and "most significant" state sponsor of terrorism.
The report highlighted Iran's support for the extremist Islamist movement Hamas, the Lebanese Hezbollah militia and the Palestinian group Islamic Jihad.
"The organisations use the cash from Iran to commit attacks," lawyer for the plaintiffs, Nitsana Darshan-Leitner, told AFP.
"UBS funded Iran for many years," she added, saying they were suing for 500 million dollars (323 million euros).
Asked if the case would create a precedent, she replied: "Absolutely, (it) opens the door against other banks that funded Iran."
A UBS spokesman told AFP that the accusations were "without foundation" and that the bank would defend itself in the courts.
The bank, which cut its links with Iran in 2006, was fined 100 million dollars in 2004 for having made currency transfers to Iran, Cuba, Libya and Yugoslavia.
UBS is also one of around 50 multinationals accused of having helped the South African government during the apartheid era, between 1948 and 1994.
Israeli lawyer Darshan-Leitner is the founder of the Shurat HaDin Israel Law Center. Its stated mission is to pursue what it calls "the perpetrators and financial supporters of Islamic terror" through the courts.
On Monday, US President George W. Bush called Iran the "single biggest threat" to peace in the Middle East, speaking ahead of a visit to the region.
