Bahrains top Shia cleric Sheikh Isa Qassim has been stripped of his Bahraini citizenship.
A statement from the interior ministry said the cleric had adopted theocracy and stressed the absolute allegiance to the clergy.
It accused him of being in continuous contact with organisations and parties that are enemies of the kingdom. The interior ministry also said he was using his position to serve foreign interest and promote sectarianism and violence.
Qassim, who holds the religious rank of ayatollah, has supported protests amongst Shia communities asking for improved civil and political rights.
In response to this, a leading figure from Irans Revolutionary Guard said that the decision could set the region on fire.
Thousands have gathered outside Qassims home to protest the decision.
The al-Khalifa [rulers of Bahrain] surely know their aggression against Sheikh Isa Qassim is a red line and that crossing it would set Bahrain and the whole region on fire, and it would leave no choice for people but to resort to armed resistance, said the statement from the official released by the semi-official Fars news agency.
The statement added that the Shia group, called Al-Wefaq National Islamic Society, which has been leading pro-democracy protests since 2011, has been closed and all its assets frozen following a ruling from the Justice Ministry.
The groups leader, Ali Sheikh Salman, who was arrested in late 2014, was also recently handed an extended sentence of up to nine years for inciting hatred against the regime and threatening national security, according to a local court.
Bahrains Shia majority often say they do not receive the same benefits as Sunni citizens, with many claiming they have limited opportunities.
In 2011, a wave of pro-democracy protests took place across the country before the authorities brought in troops from neighbouring Sunni-led Gulf states to control dissent. At the time it was reported that 35 people were killed.