Haley did not explicitly threaten to quit the body if Washington's concerns were not addressed.
Haley did not explicitly threaten to quit the body if Washington's concerns were not addressed, a prospect that first emerged in February in a leaked letter by Secretary of State Rex Tillerson.
But Haley used her speech, the first by an American UN ambassador to the Geneva-based council since its creation in 2006, to put the body on notice.
"The United States is looking carefully at this council, and our participation in it," she said.
"Being a member of this council is a privilege, and no country who is a human rights violator should be allowed a seat at the table", Haley added.
US concerns about the UN rights body predate President Donald Trump's election, and Washington has long denounced an agenda item dedicated exclusively to criticising Israel.
It has also raised concerns about a nomination process that has seen authoritarian governments elected to one of the 47 rotating seats.
While Haley has escalated those criticisms since becoming UN ambassador, her speech Tuesday was mild compared to recent remarks, including an assault she levelled in a June 2 Washington Post op-ed.
Writing in The Post, she asked "whether the Human Rights Council actually supports human rights or is merely a showcase for dictatorships that use their membership to whitewash brutality".
She argued that a system allowing regional blocs to nominate members which were then rubber-stamped by the General Assembly had turned the council into "a haven for dictators".
She cited Cuba but directed the heaviest fire at Venezuela, where two months of anti-government protests have left dozens dead.
Haley doubled down on attacking Venezuela on Tuesday, urging Caracas to "voluntarily step down from its seat... until it can get its own house in order."
In a side-event hosted by the US, Haley claimed that the council "has no excuse" for allowing Venezuela to hold a seat.
Turning to Israel, Haley reiterated US concerns about what it considers the country's unfair treatment.
It "is essential that this council address its chronic anti-Israel bias, if it is to have any credibility", she said.
Israel is the only country with a dedicated rights council agenda item, known as Item 7.
Israel and its allies have denounced the council for allowing majority-Muslim states to spearhead resolutions at every session denouncing abuses against the Palestinians.
Haley said Tuesday that the United States had identified "some areas for significant strengthening" of the council and praised past resolutions that gave "hope to people who are fighting for justice".
She was planning to outline specific reform proposals later Tuesday in a speech at the Graduate Institute in Geneva, she added.
The head of Human Rights Watch's Geneva office, John Fisher, agreed that a reformed membership process would make the rights council stronger.
"All states from all regions should work together to end back-room deals on closed voting slates," he said in a statement. "It's the best way to keep serial rights abusers off the council."
In addition to Venezuela -- where protesters have accused President Nicolas Maduro's government of systemic repression -- Burundi also sits on the council, despite several recent reports detailing gruesome abuses perpetrated by state security agents.
In his speech opening the session, UN rights chief Zeid Ra'ad Al Hussein also upbraided some council members -- including Indonesia, Egypt and the Philippines -- for restricting international investigations into alleged abuses.