The first was in December 2015.
The Fed also released a new forecast on Wednesday and it projects US economic growth this year to be 1.9 per cent and next year to be 2.1 per cent, CNNMoney reported.
Fed officials raised rates by 0.25 percentage points to a range of 0.50 per cent and 0.75 per cent.
"Job gains have been solid in recent months and the unemployment rate has declined," the Federal Reserve said in a statement.
The Fed slashed rates to zero in 2008 in the midst of the financial crisis and kept it there during the Great Recession and beyond.
The rate increase indicate that the US economy no longer needs the Fed's crutches and consumers and businesses can afford to pay more to borrow.
America has added jobs for 74 consecutive months and the country's unemployment rate has fallen to 4.6 per cent, its lowest level since 2007.
The US economy has expanded for seven years, even though the pace of growth has been slow.