Speaking to Sky's security editor Sam Kiley, Muslims Against Crusades (MAC) spokesman Anjem Choudary said the "Hell for Heroes" protest would not go ahead.
"Due to the danger of confrontation with groups like the BNP we were planning to move or reschedule the demonstration anyway," he said.
"Now that there is a risk of arrest we are calling on our members and supporters not to attend the meeting tomorrow."
Home Secretary Theresa May announced the organisation would be outlawed from midnight tonight.
Ms May said MAC is "simply another name for an organisation already proscribed under a number of names" including Al Ghurabaa, The Saved Sect, Al Muhajiroun and Islam4UK.
The decision means anybody who is a member of, or supports the organisation is committing a criminal offence.
Muslims Against Crusades Group Banned By Home Secretary Theresa May | UK News | Sky News