since July, arresting thousands of its members, including its top leadership, and cracking down on protests that often have turned violent, leaving hundreds killed.
Last week, prosecutors referred Morsi and other top Brotherhood leaders to trial on charges of conspiring with Palestinian group Hamas, Lebanon's Hezbollah, Iran and other militant groups and orchestrating the Sinai insurgency to avenge his ouster. Morsi supporters and rights groups have called the accusations implausible.
It's not yet clear what steps the government will take following the declaration. Rifaat Laqoushah, a political analyst, called the declaration "procedural" and could be overturned by the courts.
"The government should present strong evidence of the Muslim Brotherhood collaboration in terrorism and present it to courts in order to win a court ruling branding the group as a terrorist one," Laqoushah said.
Brotherhood defense lawyer Mohammed el-Damati said he expected the terrorism branding to have no legal repercussions since the group's members are already tried on terrorism-related charges and had assets seized.
But el-Damati said the decision will have a psychological impact, increasing the public's hostility against the group. Following the Mansoura attack, many local residents attacked properties of Brotherhood in anger.
"These are signs that this is leading to very serious consequences, an introduction to civil strife," he said.
Rights lawyer Taher Abu-ElNasr said it is possible that a campaign of coming arrests would be based only on the basis of membership to the Brotherhood. He described it as an "escalating campaign" from both sides.
"This is a message that there is no room for negotiations," he said.