Germany's Alternative für Deutschland (AfD) party has been designated as right-wing extremist by the country's federal office for the protection of the constitution.
"The ethnicity- and ancestry-based understanding of the people prevailing within the party is incompatible with the free democratic order," the domestic intelligence agency said in a statement.
The German foreign ministry defended the decision after US Secretary of State Marco Rubio called the move "tyranny in disguise" and Vice-President JD Vance said the Berlin Wall was being rebuilt.
The AfD came second in federal elections in February, winning a record 152 seats in the 630-seat parliament with 20.8% of the vote.
The parliament, or Bundestag, will hold a vote next week to confirm conservative leader Friedrich Merz as chancellor, heading a coalition with the centre-left Social Democrats.
AfD joint leaders Alice Weidel and Tino Chrupalla said the decision was "clearly politically motivated" and a "severe blow to German democracy".
They argued their party was being "discredited and criminalised" shortly before the change of government.
The far-right AfD had already been placed under observation for suspected extremism in Germany, and the intelligence agency had also classed it as right-wing extremist in three states in the east, where its popularity is highest.
The agency, or Verfassungsschutz, said specifically that the AfD did not consider citizens of a "migration background from predominantly Muslim countries" as equal members of the German people.
AfD deputy chairman Stephan Brandner said the decision was "complete nonsense, has absolutely nothing to do with law and order".
However, acting Interior Minister Nancy Faeser said the agency had made a clear and unambiguous decision with "no political influence whatsoever", after a comprehensive review and a report of 1,100 pages.
Bundestag Vice-President Andrea Lindholz said that as a designated right-wing extremist group the AfD should not be treated as other parties, especially in parliament.
Because of their large number of seats, AfD members could be eligible to chair parliamentary committees, but Lindholz said that idea was now "almost unthinkable".
The political importance lies in whether the issue moves from public comment into formal action, party response, court record, election authority notice or administrative decision.
