The decision, based on months of monitoring the output of websites and comments by senior figures, will have to be endorsed by parliament. Al-Muhajiroun was founded by Omar Bakri Muhammad and Anjem Choudary, and has been operating in Britain since the mid-1980s.
The group became notorious for praising the September 11 attacks in 2001. Bakri was banned from Britain by the former home secretary Charles Clarke in August 2005, on the grounds that his presence in the country was "not conducive to the public good".
At the same time, the Home Office announced its intention to ban the group but it disappeared from view before relaunching itself in June last year.
The Saviour sect and al-Ghurabaa were proscribed under the 2000 Terrorism Act.