Batasuna, the political wing of the Basque separatist group ETA, must today pay a fine of €24 million for damage from attacks carried out since last year in the Basque country.
Spanish judge Baltasar Garzon ruled that Batasuna holds "civil responsibility" for street violence blamed on ETA, including the torching of cars and buses, attacks on banks and other buildings.
Batasuna spokesman Mr Arnaldo Ortegi condemned the judgment, saying it amounted to a "de facto banning" of the party.
He said it was "singularly serious" because it aimed to deprive a "legal political formation" of its economic means.
The judgement follows a new law enabling Spain's supreme court to ban any political party whose activity is considered aimed at "deteriorating or destroying the system of freedoms or eliminating the democratic system."
Mr Ortegi said his party would continue to protest against the law, which took effect on Saturday, and repeated his call for an autonomous Basque homeland.
ETA has carried out a violent separatist campaign over the past 30 years, often targeting the Spanish coast, one of the world's top tourist destinations.
Several members of Batasuna, including elected officials, have been arrested in recent years for collaborating with ETA, which is blamed for killing at least 800 people in more than 30 years.
The ruling by Mr Garzon, Spain's leading anti-terrorist judge, cites 30 incidents of violence mainly blamed on Segi, considered ETA's youth wing.
Spanish prosecutors will today begin seizing Batasuna assets including shares and property if it fails to at least pay a deposit towards the total fine today.
Mr Ortegi called on Basques to react "forcefully against this new aggression," dismissing Mr Garzon as a "puppet" of the Spanish state seeking to eliminate the radical left - which he said "will never happen."
The law, overwhelmingly approved by parliament, specifically mentions the "active or tacit support of terrorism" as a justification for banning a party, which can be ordered at the request of the government or a minimum of 50 MPs. Prime Minister Jose Maria Aznar has made repeated calls for Batasuna to be banned, saying it is the "same thing as the ETA."
Thousands of Batasuna sympathisers protesting against the law have taken to the streets over the past month in and around the Basque country.
Left-wing and academic critics have joined them in warning that the legislation threatens to undermine political diversity and freedom of expression.
The moderate Basque Nationalist Party (PNV) warned the new law would only deepen bitter divisions in Spain's Basque region.
"Depriving 140,000 to 150,000 people of all political representation and then believing that nothing will happen - this is really a sign of not knowing the Basque Country," PNV spokesman Mr Joseba Egibar told Spanish radio.
Batasuna won 10 percent of the vote in regional elections in the Spanish Basque country in May 2001.
AFP