Hundreds of police officers searched 190 offices, mosques and apartments of members and supporters of the Islamic group The True Religion as the German government announced it was banned.
Police raided places in 60 cities in western Germany and also in Berlin, seizing documents and files, German interior minister Thomas de Maiziere said. Nobody was detained.
The group, also known as Read!, has been distributing German-language copies of the Koran across the country. The interior minister said that more than 140 youths had travelled to Syria and Iraq to join fighters there after having taken part in the group's campaigns in Germany.
"The translations of the Koran are being distributed along with messages of hatred and unconstitutional ideologies," de Maiziere told reporters in Berlin. "Teenagers are being radicalised with conspiracy theories."
Young men in long robes and bushy beards handing out German copies of the Koran have been a common sight in central and shopping areas across Germany for several years.
The banning of the group comes a week after security authorities arrested five men who allegedly aided the Islamic State group in Germany by recruiting members and providing financial and logistical help.
The recent operations suggest that the German government is trying to clamp down on radical Islamists.
The German interior minister stressed that the ban does not restrict the freedom of religion in Germany or the peaceful practice of Islam in any way, but that the group had glorified terrorism and the fight against the German constitution in videos and meetings.
"We don't want terrorism in Germany and we don't want to export terrorism," de Maiziere said, adding that the ban was also a measure to help protect peaceful Islam in the country.