Germany has banned Iran-backed Hezbollah activity on its soil and designated it a terrorist organization, the Interior Ministry said on Thursday.
Police conducted early morning raids in Germany to detain suspected members of the group.
Security officials believe up to 1,050 people in Germany are part of Hezbollah's extremist wing.
"Interior Minister Horst Seehofer has banned the Shiite terrorist organization Hezbollah in Germany," tweeted a ministry spokesman.
"Even in times of crisis, the rule of law is capable of acting," he added.
Israel praised the move and urged other European nations to follow suit.
"It is a very important decision and a valuable and significant step in the global fight against terrorism," said Foreign Minister Israel Katz.
"I call on other European countries as well as the European Union to do the same," he says.
"All the parts of Hezbollah, including the social, political and military wings are terror organizations and they should be treated as such."
German officials raided four mosque associations in the western state of North Rhine-Westphalia, Bremen and Berlin which they believe are close to Hezbollah.
Germany had previously distinguished between Hezbollah's political arm and its military units, which have fought alongside President Bashar Assad's army in Syria.
Israel and the United States had been pushing Germany to ban the group.
Last December, Germany's parliament approved a motion urging Chancellor Angela Merkel's government to ban all activities by Hezbollah on German soil, citing its "terrorist activities" especially in Syria.
A heavily armed Shi'ite Islamist group already designated a terrorist organiation by the United States, Hezbollah is also a significant backer of the government of Lebanese Prime Minister Hassan Diab, which took office in January.
On a trip to Berlin last year, U.S. Secretary of State Mike Pompeo said he hoped Germany would follow Britain in banning Hezbollah.
Britain introduced legislation in February of last year that classified Hezbollah as a terrorist organization.