The FBI had previously issued a $1 million reward for Levinson's return in 2012, five years after he went missing.
"Today, we mark eight years since Bob disappeared in Iran, and we are increasing the reward for his location and safe return to his family," said FBI Director James Comey.
"We ask anyone with information to contact the FBI. It is long past time for Bob to come home."
The National Security Council took to Twitter to say it was "committed to the safe return of Bob Levinson to his family & appreciate the support and assistance from our international partners."
"We ask the government of the Islamic Republic of Iran to work cooperatively on investigation into Levinson's disappearance so we can ensure his safe return," the NSC added.
Levinson, who turns 67 on March 10, retired from the FBI 17 years ago. He disappeared on March 9, 2007 during a visit to the Iranian island of Kish.
The Washington Post and Associated Press revealed in 2013 that Levinson had been paid by the CIA to gather information during his visits to Iran. He had been hoping to meet an informant during his trip to Iran who could provide information about Tehran's disputed nuclear program.
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The White House has denied Levinson was working for the US government when he vanished in Iran.
Washington has repeatedly requested information from Iran concerning Levinson. Iranian officials have denied all knowledge regarding his disappearance.
A father of seven, Levinson suffers from diabetes and hypertension, factors which have raised fears from his family that he may not be receiving proper healthcare.
In a separate development Monday, 19 Republican Senators called on US Secretary of State John Kerry to push for the release of three Americans held by Iran.
The Republican group, including potential 2016 presidential election candidate Marco Rubio called on Kerry to take up the case of Washington Post journalist Jason Rezaian, Pastor Saeed Abedini and former US Marine Amir Hekmati.
"It is unacceptable that as the United States engages with Iran, human rights violations at the hands of Iranian officials go unchecked and Americans languish in Iranian jail cells," the letter said.
"We urge you to discuss these imprisoned Americans and demand their unconditional release as you engage in discussion with Iranian officials."