"An order has been issued adding Indian Mujahideen and all its formations and front organisations to the list of Unlawful Activities (Prevention) Act, 1967," Home Ministry said in a statement here.
Indian Mujahideen is a shadow outfit of the banned SIMI and Pakistan-based Lashker-e-Taiba and is directly controlled by Pakistan's ISI, Home Ministry officials said.
With its addition to the terror list, the number of such outfits has gone upto 35 which includes al-Qaeda, LTTE, Jaish-e-Mohammed, Hizbul Mujahideen, CPI-Maoist and ULFA.
The Indian Mujahideen is alleged to be involved in serial bomb blasts in Delhi, Uttar Pradesh, Bangalore and Mumbai and came under spotlight on February 23, 2005 when it carried out a blast in Varanasi leaving eight people injured.
Friday's decision will be placed before a Tribunal headed by a judge of Delhi High Court within a month for adjudicating whether or not there is sufficient cause for declaring the association unlawful.
The Indian Mujahideen has carried out over 10 blasts in various parts of the country killing nearly 500 people, a senior Home Ministry official said, adding the deadliest attack of the Indian Mujahideen was in the pre-Diwali blasts in the national capital in 2005 in which 66 people were killed.
Amir Reza Khan was the founding member of the Indian Mujahideen, which was created by ISI ostensibly to spread terror through Indian front outfits. The terror group is at present headed by Iqbal Bhatkal, a resident of North Karnataka.
The outfit's hand is seen in this year's Pune blast that claimed 17 lives. Maharashtra's ATS claims that it had evidence to link Riaz Bhatkal, Iqbal's brother, with the blast. The Bhatkal brothers are believed to be in the Gulf and Pakistan.
According to the law, a district magistrate is empowered to seize any land or house belonging to the members of Indian Mujahideen.
Anyone having association with the banned terror group was liable for imprisonment ranging from two years to seven years.
Among other organisations banned by the Government are National Democratic Front of Bodoland, Manipur People’s Liberation Front, Babbar Khalsa International, Khalistan Commando Force, Harkat-ul-Mujahideen, Al-Umar Mujahideen, Maoist Communist Centre (MCC), Al Badr and Akhil Bharat Nepali Ekta Samaj.